If the minimum stock level and average stock level of raw material are 4,000 and 9,000 units respectively, find out its reorder quantity.
Correct answer: C. 10,000 units
- A. 8,000 units
- B. 11,000 units
- C. 10,000 units
- D. 9,000 units
Explanation
Average stock equals the average of minimum and maximum stock, so maximum stock is 2 × 9,000 − 4,000 = 14,000 units. Reorder quantity is maximum stock minus minimum stock, or 14,000 − 4,000 = 10,000 units.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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