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The information of Yash Company is as under: Yearly consumption 2,500 units Ordering Cost per order Rs. 200 Carrying cost per unit Rs. 1 Average consumption 45 units Maximum consumption 60 units Re-order time 2 to 3 weeks Calculate: (1) Economic Ordering Quantity (2) Ordering Level (3) Minimum Level (4) Maximum Level (5) Safety Level?
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The information of Yash Company is as under: Yearly consumption 2,50...
Calculation of Inventory Levels for Yash Company
1. Economic Ordering Quantity (EOQ)
EOQ formula is given by:
EOQ = √[(2 x D x S)/H]
where,
D = Annual Demand (in units)
S = Ordering Cost per order
H = Carrying cost per unit
Substituting the given values, we get:
EOQ = √[(2 x 2,500 x 200)/1] = 1000 units
Therefore, the Economic Ordering Quantity for Yash Company is 1000 units.
2. Ordering Level
Ordering Level is the level of inventory that triggers a new order to be placed. It is given by:
Ordering Level = Average Consumption x Re-order Time
Substituting the given values, we get:
Ordering Level = 45 x 2 = 90 units
Therefore, the Ordering Level for Yash Company is 90 units.
3. Minimum Level
Minimum Level is the level of inventory below which the stock should not fall. It is given by:
Minimum Level = Safety Stock + (Average Consumption x Lead Time)
Substituting the given values, we get:
Minimum Level = 0 + (45 x 3) = 135 units
Therefore, the Minimum Level for Yash Company is 135 units.
4. Maximum Level
Maximum Level is the level of inventory above which the stock should not go. It is given by:
Maximum Level = Re-order Level + EOQ - 1
Substituting the given values, we get:
Maximum Level = 90 + 1000 - 1 = 1089 units
Therefore, the Maximum Level for Yash Company is 1089 units.
5. Safety Level
Safety Level is the extra stock held to guard against stockouts. It is given by:
Safety Level = Z x √(Lead Time x Variance of Demand)
where,
Z = Z-value for the desired service level (e.g., 1.65 for 95% service level)
Variance of Demand = (Maximum Consumption - Average Consumption)^2 / 4
Substituting the given values, we get:
Variance of Demand = (60 - 45)^2 / 4 = 56.25
Safety Level = 1.65 x √(3 x 56.25) = 27.38 units
Therefore, the Safety Level for Yash Company is 27.38 units.
1. Economic Ordering Quantity (EOQ)
EOQ formula is given by:
EOQ = √[(2 x D x S)/H]
where,
D = Annual Demand (in units)
S = Ordering Cost per order
H = Carrying cost per unit
Substituting the given values, we get:
EOQ = √[(2 x 2,500 x 200)/1] = 1000 units
Therefore, the Economic Ordering Quantity for Yash Company is 1000 units.
2. Ordering Level
Ordering Level is the level of inventory that triggers a new order to be placed. It is given by:
Ordering Level = Average Consumption x Re-order Time
Substituting the given values, we get:
Ordering Level = 45 x 2 = 90 units
Therefore, the Ordering Level for Yash Company is 90 units.
3. Minimum Level
Minimum Level is the level of inventory below which the stock should not fall. It is given by:
Minimum Level = Safety Stock + (Average Consumption x Lead Time)
Substituting the given values, we get:
Minimum Level = 0 + (45 x 3) = 135 units
Therefore, the Minimum Level for Yash Company is 135 units.
4. Maximum Level
Maximum Level is the level of inventory above which the stock should not go. It is given by:
Maximum Level = Re-order Level + EOQ - 1
Substituting the given values, we get:
Maximum Level = 90 + 1000 - 1 = 1089 units
Therefore, the Maximum Level for Yash Company is 1089 units.
5. Safety Level
Safety Level is the extra stock held to guard against stockouts. It is given by:
Safety Level = Z x √(Lead Time x Variance of Demand)
where,
Z = Z-value for the desired service level (e.g., 1.65 for 95% service level)
Variance of Demand = (Maximum Consumption - Average Consumption)^2 / 4
Substituting the given values, we get:
Variance of Demand = (60 - 45)^2 / 4 = 56.25
Safety Level = 1.65 x √(3 x 56.25) = 27.38 units
Therefore, the Safety Level for Yash Company is 27.38 units.
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The information of Yash Company is as under: Yearly consumption 2,500 units Ordering Cost per order Rs. 200 Carrying cost per unit Rs. 1 Average consumption 45 units Maximum consumption 60 units Re-order time 2 to 3 weeks Calculate: (1) Economic Ordering Quantity (2) Ordering Level (3) Minimum Level (4) Maximum Level (5) Safety Level?
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The information of Yash Company is as under: Yearly consumption 2,500 units Ordering Cost per order Rs. 200 Carrying cost per unit Rs. 1 Average consumption 45 units Maximum consumption 60 units Re-order time 2 to 3 weeks Calculate: (1) Economic Ordering Quantity (2) Ordering Level (3) Minimum Level (4) Maximum Level (5) Safety Level? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about The information of Yash Company is as under: Yearly consumption 2,500 units Ordering Cost per order Rs. 200 Carrying cost per unit Rs. 1 Average consumption 45 units Maximum consumption 60 units Re-order time 2 to 3 weeks Calculate: (1) Economic Ordering Quantity (2) Ordering Level (3) Minimum Level (4) Maximum Level (5) Safety Level? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The information of Yash Company is as under: Yearly consumption 2,500 units Ordering Cost per order Rs. 200 Carrying cost per unit Rs. 1 Average consumption 45 units Maximum consumption 60 units Re-order time 2 to 3 weeks Calculate: (1) Economic Ordering Quantity (2) Ordering Level (3) Minimum Level (4) Maximum Level (5) Safety Level?.
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