Question

In a factory, component A is used as follows:
Normal usage : 50 Kg. per week
Minimum usage : 25 Kg. per week
Maximum usage : 75 Kg. per week
Re-order quantity : 300 Kg.
Re-order period : 4 to 6 weeks.​Calculate for component A

a) re-order level;
(b) maximum level
(C) minimum level and
(d) Average stock level​

Answer 1

Answer:yes

Reorder Level = Maximum Rate of Consumption x Maximum Reorder Period.

= 75 x 6 = 450 units

Maximum level=( Reorder Level + Reorder Quantity) – (Minimum Consumption Rate x Minimum Reorder Period)

= (450 + 300) – (25 x 4) = 650 units

Minimum level= Reorder Level – (Average Rate of consumption x Average Reorder Period)

= 450 – (50 – 5) = 200 units

Average Stock Level = (Maximum Stock Level + Minimum Stock Level)/2

= (650 + 200)/2 = 425 units

Answer 2

Answer:

Yes, the value of component A in the following criteria is as follows:

• Re-order level = 450 units
• Maximum level = 650 units
• Minimum level and = 200 units
• Average stock level​ = 425 units

Explanation:

Reorder Level:

• Reorder amount is the number of units to be ordered when placing a new purchase order, while reorder level is the quantity of a certain product that is already in stock.

• Inventory reorder points are calculated to lower inventory costs, decrease stockouts, and enhance forecasting.

Reorder Level = Maximum rate of consumption x Maximum reorder period

Reorder Level = 75 Kg. per week x 6 weeks = 450 units

Maximum level:

• It is the number of materials over which a company shouldn't go above its stock levels.
• Overstocking will be deemed to have occurred if the amount surpasses the maximum level restriction.
• Overstocking is avoided by a company since it will increase material expenses.

Maximum level= (Reorder Level + Reorder Quantity) – (Minimum Consumption Rate x Minimum Reorder Period)

Maximum level= = (450 Units+ 300 Kg) – (25 Kg. Per week x 4 weeks) = 650 units

Minimum level:

• The term "Minimum Level" refers to the lowest concentration at which the complete analytical system produces a discernible signal and an appropriate calibration point for the analyte.
• The minimum detection limit, or ML, denotes the lowest concentration at which an analyte can be detected with a specified degree of accuracy.

Minimum level= Reorder Level – (Average Rate of consumption x Average Reorder Period)

Minimum level= = 450 units – (50 K.g per week x 5 weeks) = 200 units

Average Stock Level:

• The average cost of goods held in inventory throughout an accounting period.
• It is computed by averaging the prices of the items at the start and end of the time period and then dividing the result by two.

Average Stock Level =$\frac{ (Maximum Stock Level + Minimum Stock Level)}{2}$

Average Stock Level= $\frac{650+200}{2}$

Average Stock Level= $425$ units

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