Question 1

A retail multinational sells 10,000 units of a specific electronic gadget annually. The cost of placing an order is $50. The purchase price per unit is $20, and the annual holding cost is 10% of the purchase price.

Calculate the Economic Order Quantity (EOQ). Round to the nearest whole unit.

Accepted Answer

Use the EOQ formula: sqrt((2 * D * Co) / Ch). D = 10,000, Co = $50, Ch = 10% of $20.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using $20 as the holding cost instead of calculating 10% of $20.

A retail multinational sells 10,000 units of a specific electronic gadget annually. The cost of placing an order is $50. The purchase price per unit is $20, and the annual holding cost is 10% of the purchase price.

Calculate the Economic Order Quantity (EOQ). Round to the nearest whole unit.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 4

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