Question 1

CASE 1: AQUAHARVEST LTD

AquaHarvest Ltd is a commercial aquaculture firm farming premium salmon. The company currently allows its wholesale customers 60 days to pay their invoices. However, due to cash flow constraints, the Finance Director is considering offering an early settlement discount of 2% if customers pay within 15 days. AquaHarvest currently finances its working capital using a bank overdraft that charges an interest rate of 8% per annum. Assume a 365-day year.

AquaHarvest is considering implementing a Just-In-Time (JIT) inventory system for its salmon feed. Which of the following is a critical prerequisite for JIT to be successful?

Accepted Answer

Recall the core philosophy of JIT: zero inventory, relying on perfect timing from the supply chain.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing JIT with EOQ (which balances holding and ordering costs, often leading to bulk orders).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 3

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