AAT Level 3 - Management Accounting Techniques - Inventory controls
KayEwen
Registered Posts: 1 New contributor 🐸
I am working through some practice questions for inventory controls and I have come across a question that has confused me from the BPP question bank.
The calculations for inventory controls seem to be completely different to the FI course notes.
BPP provide the following calculations:
Reorder level = (average usage x Average lead time) + Inventory buffer
Minimum inventory reorder quantity = Average usage per day x Average lead time
Maximum inventory reorder quantity = Maximum inventory level - inventory buffer
But FI course notes says:
Reorder level = Maximum usage x Maximum lead time
Minimum inventory level = Reorder level - (Average usage x Average lead time)
Maximum inventory level = Reorder level - (minimum usage x Maximum lead time) + Reorder quantity
Can someone clarify which is correct? Because each calculation gives a different answer, and I want to make sure I'm learning the correct ones for the exam!
Thanks in advance
The calculations for inventory controls seem to be completely different to the FI course notes.
BPP provide the following calculations:
Reorder level = (average usage x Average lead time) + Inventory buffer
Minimum inventory reorder quantity = Average usage per day x Average lead time
Maximum inventory reorder quantity = Maximum inventory level - inventory buffer
But FI course notes says:
Reorder level = Maximum usage x Maximum lead time
Minimum inventory level = Reorder level - (Average usage x Average lead time)
Maximum inventory level = Reorder level - (minimum usage x Maximum lead time) + Reorder quantity
Can someone clarify which is correct? Because each calculation gives a different answer, and I want to make sure I'm learning the correct ones for the exam!
Thanks in advance
0
Comments
-
The Kaplan formulas agree with the BPP formulas, as you have quoted, for those particular measures.
However, Minimum Inventory Re-Order Quantity is not the same as Minimum Inventory Level, and in the same way, Maximum Inventory Re-Order Quantity is not the same as Maximum Inventory Level, by definition; so, you are not comparing like-for-like measures.
Kaplan says:
Minimum Inventory Level (Inventory Buffer) = Re-Order Level - (Average Usage x Average Lead Time)
Maximum Inventory Level = Inventory Buffer + Maximum Re-Order Quantity
(The first being the same as the FI formula for that particular measure, the second not being quite the same as the FI formula for that particular measure, as you have quoted.)0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 325 NEW! Qualifications 2022
- 160 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 95 AAT Level 4 Diploma in Professional Accounting
- 8.9K For accounting professionals
- 23 coronavirus (Covid-19)
- 273 VAT
- 92 Software
- 274 Tax
- 138 Bookkeeping
- 7.2K General accounting discussion
- 202 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership