Calculate re-order level from the following:Safety stock:1000 units Consumption per week:500 units It takes 12 weeks to reach material from the date of ordering

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	1000 units
B	6000 units
C	3000 units
D	7000 units

Explanation:

Detailed explanation-1: -= 1000 + (500 × 12) = 1000 + 6000 = 7000 units.

Detailed explanation-2: -Reorder point = total lead time demand + safety stock You’ll need to understand how to calculate your lead time demand and safety stock before using ROP, which, thankfully, is also fairly simple.

Detailed explanation-3: -Solution(By Examveda Team) Re-order level is calculated as Maximum consumption x Maximum re-order period. To calculate the reorder level, multiply the average daily usage rate by the lead time in days for an inventory item.

Detailed explanation-4: -To calculate maximum inventory levels, use the following formula: maximum inventory levels = reorder point + reorder quantity – [minimum consumption × minimum lead time].

Detailed explanation-5: -Solution(By Examveda Team) Reorder point is divided by number of sold units for per unit of time to calculate purchase order lease time.

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