Formulas for Levels of Inventory

1. Maximum Stock Level= Re-order Level+ Re-Order Qty-[Min Consumption x

Minimum Order Period]
2. Minimum Level: Re-order Level- [Normal Consumption X Average Re-order
Period]
3. Re-Order Level= Maximum Consumption x Maximum Re-order Period
4. Danger Level= Min Rate of Consumption x Emergency delivery period
5. Danger Level= Average Consumption x Maximum reorder period for emergency
purchases.
Problem 3: A manufacturing unit uses 2 components X & Y. From the following
information,
 Normal Consumption or Usage - 50 units per week each unit
 Maximum Consumption- 75 Units per week each unit
 Minimum Consumption- 25 Units per week each
 Re-Order Quantity- “X” 300 Units & “Y” 500 Units
 Re-Order Period- “X” 4 to 6 weeks & “Y” 2 to 4 weeks
Find out
A. Re-Order Level
B. Maximum Level
C. Minimum Level
D. Average Stock Level

Problem 4: From the particulars given below calculate the EOQ.

Annual Consumption -1,20,000 Kgs
Unit Cost-Re 1 per Kg
Ordering Cost-Rs 75 per order
Cost of Carrying Inventory-20% on Average Inventory.

Problem 5: From the particulars given below, find out the EOQ, Number of Orders to
be placed and cost of managing the inventory
Annual Usage -4,000 Units
Cost of Order-Rs 5/-
Cost per Unit-Rs 2/- per Unit Storage and Carrying Cost-8% on Average inventory