Question 1

Section A

SteelWorks Manufacturing requires 10,000 units of a specific alloy per year. The cost to place a single order is $50. The holding cost per unit per year is $4.

Using the Economic Order Quantity (EOQ) formula, calculate the optimal order quantity. Enter the exact number only.

Accepted Answer

Use the EOQ formula: Square root of ((2 * Co * D) / Ch). Plug in D = 10,000, Co = 50, Ch = 4.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to take the square root, or using monthly demand instead of annual demand (though annual is given here).

Section A

SteelWorks Manufacturing requires 10,000 units of a specific alloy per year. The cost to place a single order is $50. The holding cost per unit per year is $4.

Using the Economic Order Quantity (EOQ) formula, calculate the optimal order quantity. Enter the exact number only.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 3

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