Reorder level

Robbie_R
Robbie_R Registered Posts: 1
in Management Accounting: Costing
Hi

I would be grateful if someone could confirm the correct formula for the Reorder level as both BPP and Osbornes are giving two different formulas.

BPP states: Reorder level = (max usage x max lead time) + Buffer
Osbornes states: Reorder level = (average usage x average lead time) + Buffer

I would assume BPP is correct as the formula for Minimum Inventory Level = reorder level – (average usage x average lead time).

Therefore under Osbornes thinking MIL = reorder level – reorder level which would always = 0 and doesn't really make sense.

I have emailed AAT but not received a response as yet.

Thanks!

Comments

  • September
    September Registered Posts: 29 Regular contributor ⭐
    In my text book, which is Kaplan, it is the same as your BPP one. Surprised that not even an AAT person has responded to your post.

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