- 1 Marks
Question
PQR Limited has an average usage of 1,200 units of stamps, minimum usage of 800 units, and maximum usage of 2,000 units per day. If the lead time is 10 – 15 days and the previously calculated Economic Order Quantity is 6,000 units, calculate the Maximum Level.
A. 30,000 units
B. 28,000 units
C. 18,000 units
D. 15,000 units
E. 8,000 units
Answer
Answer: B. 28,000 units
Explanation:
The formula for calculating the maximum inventory level is:
Maximum Level=Re-order Level+Economic Order Quantity−(Minimum Usage×Minimum Lead Time)\text{Maximum Level} = \text{Re-order Level} + \text{Economic Order Quantity} – (\text{Minimum Usage} \times \text{Minimum Lead Time})
Step 1: Calculate the re-order level:
Re-order Level=Maximum Usage×Maximum Lead Time=2,000×15=30,000 units
Step 2: Apply the formula:
Maximum Level=30,000+6,000−(800×10) =30,000+6,000−8,000=28,000
Thus, the maximum level is 28,000 units.
- Tags: EOQ, Inventory Control, Lead Time, Maximum Level
- Level: Level 1
- Series: NOV 2014
- Uploader: Dotse