Page 59 - DBP5043
P. 59
INVENTORY
If a company requires S units of goods X, per year, and orders Q in
the same amount of N times a year, then:
Quantity ordered each time is, Q = S / N
Stock Average, A = Q / 2 or A = min level + max level
2
min level = safety stock ; max level = min level + Q
EXAMPLE:
If Company A requires 300,000 units of goods X per year, and
orders made 6 times a year, calculate the level of Q and
average stock. If the unit price of items X is RM3.00 with the
percentage of the cost savings is 11.25%, CALCULATE TCC
DETERMINATION OF TOTAL ORDERING STOCK (TOC)
Costs orders are fixed, it does not depend on the quantity
ordered.
TOC = O * N or Demand @ Sales X O
Q
O = order cost for each order ; N = number of each order per
year
EXAMPLE:
If the cost of each purchase is RM150 and the company needs
300,000 units a year with stocks of goods X is an average of
30,000 units, N = 6. Calculate the TOC
