Re-order period - standard eoq model, Financial Accounting

Assignment Help:

The standard EOQ model supposes that materials can be procured immediately and thus implies that the firm may place an order for replenishment as the inventory level drops to zero. In the real world, although, procurement of materials takes time and thus the order level must be such the inventory at the time of ordering suffices and meets the requirements of production during the procurement period termed is also termed as Lead Time.

If the usage rate of materials and the lead time for procurement are identify with positively then the ordering level would easily as:

Lead-time in days for procurement X Average daily usage

As the usage rate and lead time are probable to vary: the reorder level must be higher than the normal consumption period need throughout the procurement period so as to provide a measure of safety in the face of variability of lead time and usages.  Places differently, the reorder level must be equal to as:

Normal consumption + Safety stock


Related Discussions:- Re-order period - standard eoq model

Compute and list the budget - budgeting, When Lydia started her vending mac...

When Lydia started her vending machine business, she instituted flexible budgeting for the first few months of operations. Her first monthly budget numbers were these: Cost of g

Bond that matures in 12 years, You just purchased a bond that matures in 12...

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% yearly coupon. The bond has a present yield of 5.74%. What is the bond's yield

Describe about capital stock, Q. Describe about Capital Stock? Capital ...

Q. Describe about Capital Stock? Capital Stock - Ownership shares of a CORPORATION authorized by its ARTICLES OFINCORPORATION. Money value assigned to a corporation's issued sh

Calculate liquidity and balance sheet, Jaedan Industries has the following ...

Jaedan Industries has the following account balances as of December 31, 2010.  The firm's dividend payout ratio is 25% and the tax rate is 34%.  The firm's stock price on December

The accounting equation., Indicate how each of the following transactions a...

Indicate how each of the following transactions affects the accounting equation. a.Purchase of supplies on account. b.Payment of wages. c.Cash sale of goods for more than their cos

OPERATING CYCLE, APPLICABILITY OF THE OPERATING CYCLE IN VEGETABLE GROWING ...

APPLICABILITY OF THE OPERATING CYCLE IN VEGETABLE GROWING BUSINESS

Accounting policies-notes to the accounts, Accounting Policies These fina...

Accounting Policies These financial statements have been prepared under the historical cost basis of accounting which is modified to accommodate the revaluation of certain proper

Retained earnings, Q. Retained earnings is increased by each of the followi...

Q. Retained earnings is increased by each of the following except a. some disposals of treasury stock. b. net income. c. prior period adjustments. d. All of these increase retained

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