The requirement here was for candidates to calculate the total cost of the current ordering policy, the total cost of an ordering policy using the economic order quantity (EOQ), and the net cost or saving of introducing an ordering policy using the EOQ. Many answers gained good marks here.

To calculate the total cost of the current ordering policy, candidates had to calculate and sum the current ordering cost and the current holding cost. The annual ordering cost was based on 12 orders per year, while the annual holding cost was based on average inventory. Average inventory was the sum of buffer inventory and half of the monthly order quantity.

Where candidates made calculation errors, these showed a lack of understanding of the calculation process just described, for example including only half of buffer inventory in average inventory, or using annual demand as average inventory, or omitting holding cost completely.

To calculate the total cost of an ordering policy using the EOQ, candidates had to calculate the EOQ and the revised number of orders per year, and then repeat the calculation process already described. In addition to the calculation errors already mentioned, some candidates were not able to calculate the EOQ.

Almost all candidates who calculated the two total costs also calculated the net cost or saving of introducing an ordering policy using the EOQ.