The Ordering Level In Cost Accouting.
Ordering level is that level of material in the store where store keeper initiates fresh requisition to the purchasing departments for purchase of materials. This level is fixed some where between minimum level and maximum level. This level depends upon the following factors:
- Lead time or delivery time.
- Rate of consumption of the materials.
- Economic order quantity.
- Minimum level.
Basing upon the above factors, the following formula has been derived:
Order level or (Reordering level) = Minimum level + consumption during the time required to get fresh delivery.