From the following information calculate : 10 (a) Re-order Quantity (b) Maximum Level of Stock and (c) Minimum Level of Stock: Normal usage per week — 150 units Minimum usage per week — 120 units Maximum usage per week — 180 units Cost of placing an order — ` 780 Delivery period — 3 to 5 weeks Annual consumption — 7,800 units Annual carrying cost per unit — ` 20
Answers
Answer:
Maximum Level of Stock = (Reorder Level + Reorder Quantity) – (Minimum rate of consumption x Minimum reorder period)
Maximum Level may be alternatively fixed as Safety Stock + Reorder Quantity or EOQ.
Reorder level – (Average rate of consumption x Average reorder period)
(iii) Safety Stock = (Annual Demand/365) x (Maximum Reorder Period – Average Reorder Period)
(iv) Reorder level or Ordering level = Maximum rate of consumption × Maximum reorder period. Alternatively, it will be = safety stock + lead time consumption
[lead time consumption will be = (Annual consumption -s- 360) × lead time
(v) Danger level = It is slightly below the minimum level. It is a level at which special efforts should be made to obtain supplies of materials, i.e.
Minimum rate of consumption × Emergency delivery time
(vi) Average Stock level = (Maximum stock level + Minimum stock level) x 14 or Minimum Stock level + 14 Reorder Quantity.
Obviously, the Reordering level is below the Maximum level, and Minimum level is below the Reordering level and the Danger level is below the Minimum level. Safety Stock is above minimum level
Explanation:
It is formula it help calculate the answer