Non-zero lead time, Managerial Accounting

Non-zero lead time (determining reorder point)

This basic EOQ model assumes that the suppliers lead time is zero (i.e. goods are delivered immediately on the day the order was made).  In reality, however, supplies are rarely ordered and received on the same day. Accordingly, orders must be placed some time before stocks reach zero.  In world of certainty (when demand is continuous and constant) the reorder point will be the number of days/weeks lead time multiplied by the daily/weekly usage during the period.

That is, Reorder point = Average daily usage x Lead time in days.

1369_curve.jpg

Note: The reorder point has no cost implications, since it does not affect the EOQ.

 

Posted Date: 12/6/2012 6:27:40 AM | Location : United States







Related Discussions:- Non-zero lead time, Assignment Help, Ask Question on Non-zero lead time, Get Answer, Expert's Help, Non-zero lead time Discussions

Write discussion on Non-zero lead time
Your posts are moderated
Related Questions
why the activity costing have most comparative bid?

Accounting Method is the method by which income and expenses are accounted for taxation purposes. The Internal Revenue Service needs taxpayers to select an accounting method that p

Explain the techniques of performance budgeting It will also be useful to examine the three major aspects of this technique: Structural aspects : the structural aspects inv

How do the different cost classifications can assist the management


MULTIPLE REGRESSION The least square regression equation discussed above was based on the assumption that total cost was determined by only one activity based variable. However

These loans are given by the Banker for short periods for an exact activity like financing for a civil contract work. As the customer receives payment, the transaction will be repa

JIT and Management Accounting Management accountants in many organizations have been criticized because of their failure to change their managing accounting system to reflect

Funds produced from operations, throughout an accounting period, raise working capital by an equivalent amount. The two major components of funds generated from operations are depr

Transient Analysis A state is said to be transient if it is impossible to move to that state from any other state except itself. This state is temporary and eventually a stead