Non-zero lead time, Managerial Accounting

Assignment Help:

Non-zero lead time (determining reorder point)

This basic EOQ model assumes that the suppliers lead time is zero (i.e. goods are delivered immediately on the day the order was made).  In reality, however, supplies are rarely ordered and received on the same day. Accordingly, orders must be placed some time before stocks reach zero.  In world of certainty (when demand is continuous and constant) the reorder point will be the number of days/weeks lead time multiplied by the daily/weekly usage during the period.

That is, Reorder point = Average daily usage x Lead time in days.

1369_curve.jpg

Note: The reorder point has no cost implications, since it does not affect the EOQ.

 


Related Discussions:- Non-zero lead time

Production during the period, Coolidge Company estimates that its productio...

Coolidge Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period and that overhead costs will amount to $500,000. What predete

cost per equivalent unit was determined , The Ragan Corporation uses a pro...

The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of th

How much was Topaz’s operating income (income before taxes), How much was T...

How much was Topaz’s operating income (income before taxes) last year?

Accounting period, 1. In common, accounting period is the time period refle...

1. In common, accounting period is the time period reflected by a series of financial statements.  2. In terms of taxation, it is twelve-month period a taxpayer uses to know

Explain sales budget, Explain Sales budget A sales budget is an estimat...

Explain Sales budget A sales budget is an estimate of expected sale during a budget period. A sales budget is known as a nerve center or backbone of the enterprise. The degree

Determine the distribution cost and research cost, Determine the Distributi...

Determine the Distribution cost and Research cost Distribution cost: The cost of sequence of the operations which begin with making the packed product available for dispa

Describe benchmarking, Describe Benchmarking It is the process of measu...

Describe Benchmarking It is the process of measuring products service or activities against the best level of performance which may be found either inside or outside the organi

What are the advantages of kaizen costing, Advantages of kaizen costing ...

Advantages of kaizen costing 1) Record individual tasks 2) Instantly replay observation 3) Select and use best practice 4) Categorize activities using kaizen terminolo

What rights do the stockholders have, When forming a company, the options a...

When forming a company, the options are sole proprietor, partnership, and corporation. Most choose corporation. Why is the corporate form seen to be best? What rights do the stockh

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd