ExpertMedium2 marksShort Answer
ACCA · Question 14 · Cost accounting techniques
A rare metals refinery uses 10,000 kg of a specific ore annually. The cost of placing an order is $200. The holding cost per kg per year is $4.
Calculate the Economic Order Quantity (EOQ). (Enter the number only)
A rare metals refinery uses 10,000 kg of a specific ore annually. The cost of placing an order is $200. The holding cost per kg per year is $4.
Calculate the Economic Order Quantity (EOQ). (Enter the number only)
How to approach this question
Use the EOQ formula: Square root of [(2 * C0 * D) / Ch]. C0 = 200, D = 10,000, Ch = 4.
Full Answer
EOQ = √((2 * 200 * 10,000) / 4) = √(4,000,000 / 4) = √1,000,000 = 1,000 kg.
Common mistakes
Forgetting to take the square root at the end of the calculation.
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