PQR Ltd. manufactures a special product, which requires OʻZED'. The following particular
were collected for the year 2018-19:
(i) Monthly demand of Zed 7.500 units
Er) Cost of placing an order
500
0
1) Reorder period
5 to 8 weeks
) Cost per unit
60
) Carrying cost % p.a.
10%
Normal usage
500 units per week
Minimum usage
250 units per week
Maximum usage
750 units per week.
ired:
Reorder
quantity ; (ii) Reorder level ; (iii) Minimum stock level
maximum stock level: (v) Average stock level
Answers
Answer:
PQR Ltd. manufactures a special product, which requires OʻZED'. The following particular
were collected for the year 2018-19:
(i) Monthly demand of Zed 7.500 units
Er) Cost of placing an order
500
0
1) Reorder period
5 to 8 weeks
) Cost per unit
60
) Carrying cost % p.a.
10%
Normal usage
500 units per week
Minimum usage
250 units per week
Maximum usage
750 units per week.
ired:
Reorder
quantity ; (ii) Reorder level ; (iii) Minimum stock level
maximum stock level: (v) Average stock level
Answer:
(i) 3873 (ii) 6000 (iii) 2750 (iv) 8623 (v) 4686.5 (approx. 4687
Explanation:
Reorder quantity = √2AO\c×i
= √2×7500units×12months×500\60× 10%
= 3873 units
Reordering level = Max. consumption × Maximum reordering period
= 750 × 8
= 6000 units
Minimum stock level = Reordering level - (Normal consumption × Normal Reorder period
= 6000 - ( 500 × 6.5 )
= 2750 units.
Maximum stock level = Reordering level + Reorder quantity - ( Minimum consumption × Minimum reorder period
= 6000 + 3873 - ( 250 × 5)
= 8623
Average stock level = Minimum stock level + 1\2 Reorder quantity
= 2750 + 1\2 ( 3873)
= 4686.5 units (approx . 4687)