Question Two （b）
Candidates were asked here to calculate whether an offered bulk purchase discount was financially acceptable, commenting on assumptions made by the calculation.
Perhaps because information on holding cost and order cost was provided in the question, many candidates calculated the economic order quantity （EOQ）。 The question made no reference to the EOQ and an EOQ calculation was not necessary. In fact, what was needed was a comparison between the current ordering policy and the ordering policy employing the bulk discount. Candidates who wasted time calculating the EOQ found that the company was already using an EOQ approach to ordering inventory. Some answers did not gain full credit because they did not comment on the assumptions made by their calculations. Credit was also lost by candidates who could not calculate order cost, or holding cost, or both.
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