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
Contribution margin Analysis Contribution Contribution is the  difference between sales and variable cost or marginal cost of sales . if may also be defined as the excess

FLEXIBLE BUDGETING Flexible budget may be used in one of two ways: Planning and Control. At the planning stage when budgets are set, to reduce the effect of uncertainty. For ex

Replacement cost It is the cost of replacing a material or asset, by purchase from the current market. If an X material was originally purchased @ Rs. 250 per Kg. And know i

What is kaizen Kaizen is the Japanese term for continuous improvement. The kaizen concept was pioneered by in Japan by Toyota as daily challenge to all its to improve their pro


A cash budget is one of the main important devices to plan and control cash payments and receipts. In preparation of a cash budget the subsequent points are considered. Cred

Western States Supply, Inc. (WSS), consists of three divisions—California, Northwest, and Southwest—that operate as if they were independent companies. Each division has its own sa

Question: (a) The demand for the output of a certain company is very elastic and modern plant recently installed is capable of greatly increased production. Output at present

Zero-Base Budgeting Zero-Base Budgeting (ZBB) was first developed and introduced for business by Peter A. Pyhrr. From this starting ZBB has been explored and adopted by many o

Selling product for 31.00 and Variable expenses are 26.00. In order to cover the fixed expenses 31,500 hats must be sold what is the Total fixed cost in dollars?