In this method the minimum and maximum level for all items of inventory are fixed. These levels function as an origin for initiating action so that the quantity of all items is controlled. These types of levels are not permanent and probable to change along with the level of activity. The maximum level specifies the maximum quantity of an item of inventory that can be held at a point of time. The maximum level of inventory would base upon the subsequent factor:

• Availability of storage space
• lead time (time needed in receiving the goods ordered)
• Availability of working capital
• Average rate of consumption of material
• cost of storage and insurance
• Risk of obsolescence and deterioration
• Quantity discounts

Minimum level signifies the quantitative balance of an item of inventory, that must be kept in hand at all times. This is a level below that the inventories must not fall. This level of inventory is held to ignore stock out and consequent stoppage of production. The minimum level would basically depend upon:

• Rate of consumption of material
• The maximum and minimum time needed to get fresh supplies
• The re-order level.

Posted Date: 4/9/2013 5:43:24 AM | Location : United States

Ask an Expert

Related Discussions:- Mini-max system, Assignment Help, Ask Question on Mini-max system, Get Answer, Expert's Help, Mini-max system Discussions

Write discussion on Mini-max system
Your posts are moderated

Write your message here..

Related Questions

Joint Audit, Impact of joint Audit on financial reporting quality Impact of joint Audit on financial reporting quality

Significance in working capital cycle, For several firms trade payables - s... For several firms trade payables - suppliers of goods and services - represent the major component of current liabilities the amounts owed by the company which have to be repaid wi

Investment of funds to provide for legacies and interest, INVESTMENT OF FUN... INVESTMENT OF FUNDS TO PROVIDE FOR LEGACIES AND INTEREST ON LEGACIES (a) Where a general legacy is given for life, the sum bequeathed shall, at or before the end of a year afte

Distribution under the intestacy provisions, DISTRIBUTION UNDER THE INTESTA... DISTRIBUTION UNDER THE INTESTACY PROVISIONS When a person dies without leaving a will, his estate is distributed according to the Law of Succession Act. When a person dies, fou

What is fair value in stock market, Q. What is fair value in stock market? ... Q. What is fair value in stock market? Fair value - Amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between

Balance Of Payment, it is for what purpose? it is for what purpose?

Assets-balance sheet-trusts laws and accounts, Assets   1) The classificat... Assets   1) The classification of investments in the Balance Sheet will be under a few broad headings with schedules listing the individual assets. Where the Trustees Act has been

Explain the term reporting interval - management accounting, Explain the te... Explain the term Reporting interval - Management accounting For most businesses, financial accounting reports are produced on an annual basis, though some large businesses prod

Estimate the quantity of money, The economy of Cotai contains 2000 $1 bills... The economy of Cotai contains 2000 $1 bills. (a) If people hold all money as currency, what is the quantity of money? (b) If people hold all money as demand deposits and bank

Multiple choice, A____ is a loss to the business and a gain to the debtor A____ is a loss to the business and a gain to the debtor