Two components A and B are used as follows: Normal usage 3,000 units Maximum usage 4,500 units Minimum usage 1,500 units Units A B Re-order Quantity (units) 20,000 40,000 Re-order Period 4 to 6 weeks 2 to 4 weeks Calcula

Answer 6(c) Inventory Level Calculations (i) Re-order Level (ROL) Formula: ROL = Maximum Usage x Maximum Re-order Period For Component A: Maximum Usage = 4,500 units Maximum Re-order Period = 6 weeks ROL (A) = 4,500 units x 6 weeks = 27,000 units For Component B: Maximum Usage = 4,500 units Maximum Re-order Period = 4 weeks ROL (B) = 4,500 units x 4 weeks = 18,000 units (ii) Maximum Level Formula: Maximum Level = Re-order Level + Re-order Quantity - (Minimum Usage x Minimum Re-order Period) For Component A: ROL (A) = 27,000 units Re-order Quantity (A) = 20,000 units Minimum Usage = 1,500 units Minimum Re-order Period = 4 weeks Maximum Level (A) = 27,000 + 20,000 - (1,500 x 4) = 47,000 - 6,000 = 41,000 units For Component B: ROL (B) = 18,000 units Re-order Quantity (B) = 40,000 units Minimum Usage = 1,500 units Minimum Re-order Period = 2 weeks Maximum Level (B) = 18,000 + 40,000 - (1,500 x 2) = 58,000 - 3,000 = 55,000 units (iii) Minimum Level Formula: Minimum Level = Re-order Level - (Normal Usage x Normal Re-order Period) For Component A: ROL (A) = 27,000 units Normal Usage = 3,000 units Normal Re-order Period = (4+6)/2 = 5 weeks Minimum Level (A) = 27,000 - (3,000 x 5) = 27,000 - 15,000 = 12,000 units For Component B: ROL (B) = 18,000 units Normal Usage = 3,000 units Normal Re-order Period = (2+4)/2 = 3 weeks Minimum Level (B) = 18,000 - (3,000 x 3) = 18,000 - 9,000 = 9,000 units (iv) Average Inventory Formula 1: Average Inventory = Minimum Level + (1/2 x Re-order Quantity) For Component A: Average Inventory (A) = 12,000 + (1/2 x 20,000) = 12,000 + 10,000 = 22,000 units For Component B: Average Inventory (B) = 9,000 + (1/2 x 40,000) = 9,000 + 20,000 = 29,000 units OR Formula 2: Average Inventory = (Minimum Level + Maximum Level) / 2 For Component A: Average Inventory (A) = (12,000 + 41,000) / 2 = 53,000 / 2 = 26,500 units For Component B: Average Inventory (B) = (9,000 + 55,000) / 2 = 64,000 / 2 = 32,000 units