COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
5000 units
|
|
|
4000 units
|
|
|
2500 units
|
|
|
7000 units
|
Detailed explanation-1: -The average inventory formula is: Average inventory = (Beginning inventory + Ending inventory) / 2.
Detailed explanation-2: -To get the average inventory from your EOQ, you divide your EOQ by 2.
Detailed explanation-3: -Calculating minimum inventory levels To calculate your minimum inventory levels, use the following formula: minimum inventory level = reorder point – [normal consumption × normal delivery time].
Detailed explanation-4: -The Average stock level is calculated such as: Average Stock Level = Minimum stock Level + 1/2 of Reorder Quantity. (vi) Normal reorder period = 10 days. Maximum Stock Level = Reordering Level + Reorder Quantity – (Minimum Consumption x Reorder period) = 3, 000 + 1, 600 – (120 X 10) = 3, 000 + 1, 600 – 1, 200 = 2, 400 units.