Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Safety Stock
- This topic has 4 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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- June 27, 2018 at 8:48 pm #460398
Dear John, what would be an accurate formula to calculate the Safety Stock?
June 28, 2018 at 6:58 am #460417There is no formula. It is up to the company to decide whether or not they want to carry safety (or buffer) stock, and if so then how much.
If relevant in an exam question then you will given more information.June 28, 2018 at 9:38 am #460431Ok got it.
Well I have seen the formula which is like:
(Maximum Usage × Maximum Lead Time) – (Average Usage × Average Lead Time)
and on some websites
(Maximum Usage × Maximum Lead Time) – (Minimum Usage × Minimum Lead Time)
This is the reason I asked the question, because I am confused between two of these.
June 28, 2018 at 12:23 pm #460445Additionally, I have one more misunderstanding related to the topic. Is the ‘Safety Stock’ , ‘Buffer Stock’ and the ‘Minimum Level of Inventory’ the same?
June 28, 2018 at 4:58 pm #460470With regard to formulae, then as I said it depends what information is given in the question (i.e. whether you are given maximum usage etc..).
However all of this is explained in my free lectures (with examples) – the lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
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