Discuss Three Factors That Would Affect The Maximum Stock Level Held By A Business

Maximum limit of stock can be described as the higher level of inventory control and the quantity must not exceed the quantity which is defined by the management of business. Maximum limit of stock can be defined as the high quantity of products or items which does not have permission to sell. These products must not get into the market. Then obviously the quantity of these will be increased.

This particular level is constant after concentrating on factors such as inventory, investment, use of source materials, and price of insurance and economic order limit. These factors affect the stock level.

For maintaining such a huge business three features to be considered. They are

  • Inventory cost
  • cost of source materials
  • Availability of resources.

Inventory cost:

Inventory cost is the first most important factor for maximum stock level maintenance. While holding the maximum stock, the important goal to be considered is that the cost of inventory is less. Here it needs to be consider that the order of quantity. Observations on stock levels should be maintained repeatedly. The checking should be done every day.

Cost of source materials:

Stock of source materials should be maintained perfectly. For a business to attain high-level of stock, source materials must be divided into specific no of source materials.

Availability of resources:

Here this concept plays a vital role in attaining stock maintenance. This level is fixed by considering the amount of source materials. The maximum level of stock can be attained by supply management of resources or raw materials.

If the maximum stock level was 25, 000 units and the minimum stock level was 4000 units, calculate the average stock level? 

Average stock level = ½(Maximum stock level + Minimum stock level)

Here, average stock level=1/2(25000+4000 units)

= 14, 500 units.

Explain what is meant by out-of-stock-cost? What could be the impact of this on PDL?

Out-of-stock-cost is costs that can be directly or indirectly recognized that it product  not available ifthe buyer ionce wants to purchase the product and such cost  includes lost furure sales .

 Out-of-stock will incur when it will face out -of- stock leads to loss of sales revenue or else PDL  is incapable to  meet the demand or the orders of the customer. which results the lost contribution margin.

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