Minimum Limit or Minimum Level of Stock:

Learning Objective: 

1. Definite and explain minimum limit or minimum level of stock.
2. How is minimum limit or minimum level calculated?

Definition and Explanation:

The minimum level or minimum stock is that level of stock below which stock should not be allowed to fall. In case of any item falling below this level, there is danger of stopping of production and, therefore, the management should give top priority to the acquisition of new supplies.

Formula:

Minimum level or minimum limit can be calculated by the following formula:

[ Minimum limit or level = Re-order level or ordering point – Average or normal usage × Normal re-order period ]

Or the formula can be written as:

[ Minimum limit or level = Re-order level or ordering point – Average usage for Normal period ]

Example:

You may also be interested in other relevant articles:

• Need for Materials Control
• Requirements of a System of Materials control
• Stock Control
• Ordering Level or Ordering Point or Re-order Level
• Maximum Level or Maximum Limit
• Danger Level
• Economic Order Quantity EOQ

 

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