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I have a query in F2 reorder level, please explain the method of solving this question
XyZ follows EOQ model, following are some details
Max consumption 400 units/day
Min consumption 200/day
safety stock 600 units
reorder quantity 3600 units
reorder period 10 to 15 daysReorder level = ?
Max Inventory level = ?
Min Inventory level = ?The answer is 4350 for reorder level, 5950 for max inventory and 600 for min inventory
Please explain, really appreciate your help, ThanksAs I know, Safety stock also known as Min stock or inventory ( in this case) and buffer stock. So we have Min inventory is 600.
By the way, we have Min inventory= reorder level – average usage * average lead time
600 = Reorder level – ( 400+200)/2 * ( 10+15)/2
Reorder level = 4350
Max inventory = Reorder level + reorder quantity – Min usage * Min Lead time
= 4350 + 3600 – 200*10
= 5950
* Note : in this case you can not use the fomula Reorder Level = Max usage * Max lead time. Because that only use for non-constant demand. In this case they did not mention it. So we need to start from Safety Stock.
:D. That’s my own idea, I’m just a fresh ACCA learner>….< so Mistake is not avoided.. check it for me. thanksThanks for helping out… That logic is correct, we do start with safety stock but i also got across this formula:
reorder level = avg usage x avg time + safety inventory
=> 400+200/2 x 10+15/2+ 600
=> 300 x 12.5 + 600
=> 3750 + 600
=> 4350Its an authentic formula and is faster to apply…
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