A company uses three raw materials A, B and C for a particular product for which the following data apply: Raw Material Usage per unit of product…

(i) Minimum stock of A Re-order level – (Average consumption × Average time required to obtain delivery) = 8,000 kg. – (200 units × 10 kg. × 2 weeks) = 4,000 kg. (ii) Maximum stock of B Re-order level – (Min. Consumption × Min. Re-order period) + Re-order quantity = 4,750 kg. – (175 units × 4 kg. × 3 weeks) + 5,000 kg. = 9,750 - 2,100 = 7,650 kg. (iii) Re-order level of C Maximum re-order period × Maximum Usage = 4 weeks × (225 units × 6 kg.) = 5,400 kg. OR Minimum stock of C + (Average consumption × Average delivery time) = 2,000 kg. + [(200 units × 6 kg.) × 3 weeks] = 5,600 kg. (iv) Average stock level of A = Minimum stock level of A + Re-order quantity / 2 = 4,000 kg. + 10,000 kg. / 2 = 4,000 + 5,000 = 9,000 kg. OR Minimum stock + Maximum stock / 2 = 4,000 + 16,250 / 2 = 10,125 kg. Working note Maximum stock of A = ROL + ROQ – (Minimum consumption × Minimum re-order period) = 8,000 kg. + 10,000 kg. – [(175 units × 10 kg.) × 1 week] = 16,250 kg.