The cost of placing each purchase order is 20, and the company plans to purchase 5,000 units during the year at a purchase price of 50 per unit,…
CA Intermediate · Cost and Management Accounting · MTP · January 2026
The cost of placing each purchase order is 20, and the company plans to purchase 5,000 units during the year at a purchase price of 50 per unit, inclusive of transportation charges. The annual storage cost per unit is 5. The lead time varies, with an average of 10 days, a maximum of 15 days, and a minimum of 5 days. The rate of consumption also fluctuates, with an average usage of 15 units per day and a maximum usage of 20 units per day. The maximum stock level is:
Suggested Answer and Working Notes:
Correct Answer: Option (A)
450 units
Topics: Material Cost
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