Q.A manufacturer buys certain materials from a supplier @ Rs 40 per unit. He needs 100 units per month. Annual return on investment is 10%. Rent, taxes and insurance per unit per year is 2.5% of the cost per unit. Cost of placing an order is Rs. 180. Determine EOQ.

The blank is Maximum re-order period (maximum lead time).

The re-ordering (ordering) level is the stock level at which a fresh purchase order must be placed so that stock does not run out before the new supply arrives. To be safe it assumes the worst case — the heaviest usage during the longest delivery time: …

Maximum consumption × Maximum reorder period = Reorder (ordering) level.

Stock levels are tools of material control:

• Reorder level = Maximum consumption × Maximum reorder period. It is deliberately based on the maximum usage and maximum lead time so that stock does not run out even in the worst case before the new supply arrives. …

One word/term: VED analysis.

VED analysis classifies items — especially spare parts — by how critical they are to production:

• V = Vital (a stock-out halts production; keep high stock),
• E = Essential (a stock-out causes serious loss; moderate stock),
• D = Desirable (a stock-out causes minor inconvenience; low stock). …

Correction: "idle" → lead time.

The gap between the moment a purchase order/indent is raised and the moment the material is actually received in stores is the lead time (procurement time). Reorder level is fixed with this lead time in mind so that stock lasts until the fresh supply arrives.

…

Fill in: Economic (Ordering Quantity).

EOQ = Economic Ordering Quantity — the quantity to order each time that keeps the total inventory cost (ordering cost + carrying/holding cost) at a minimum.

• Formula: EOQ = square root of (2 × Annual consumption × Cost per order ÷ Carrying cost per unit per year). …

Material control covers purchase, storage and issue of materials — option (b).

In +2 Class-12 Cost Accounting (CHSE Odisha), material control is the systematic control over the material cycle so that the right material is available in the right quantity, quality, time and cost. It spans: …

Purchasing should begin at the (d) Re-order level.

Re-order level is the predetermined stock level at which a new purchase order is placed, set so that the remaining stock (down to minimum level) covers consumption during the procurement lead time. Formula: Re-order level = Maximum usage × Maximum lead time (or = Minimum level + (Normal usage × Normal lead time)).

• Minimum level → the buffer floor, not the trigger to buy. …