Question

Following information is available in respect of a particular material used by CTLS Limited.

• Minimum materials consumption - 80 units per day

• Maximum materials consumption - 120 units per day

• Re-order quantity - 4 800 units

• Re-order period - Minimum 20 days Maximum 30 days

Using the above information, calculate;

i. Re-order level

ii. Maximum stock level

iii. Minimum stock level

iv. Average stock level

Answer 1

Re-order level = Reorder level is quantity where we should place the order so we can't be out of stock till the delivery is received.

(i)Reorder level = Maximum consumption × Maximum Re-order period

120 unit × 30 days = 3600 units

(ii) Maximum stock level = Reorder Level + Reorder quantity -(minimum consumption× Minimum reorder period)

= 3600units+4800units - (80 units × 20 days )

= 6800 units

(iii) Minimum stock level = Re ordering level -(normal consumption × Normal reorder period )

Minimum stock level = 3600units - ( 100 units × 25 days)

= 1100 units

(iv) Average stock level = Minimum stock level + (Re order quantity/2)

Average stock level = 1100 units + (4800units/2)

= 3500 units