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### Lecture 5: Marginal Costing Part- 5

00:46:25

Published    21-Aug-2018      Bilingual

VIDEO BY KARAN GABA CLASS B.COM (H/P) COST ACCOUNTING (MATERIAL COST)
This video lecture aims at explaining the topic Material Cost. Generally raw material form a very big proportion of the total cost of production. Material costing involves the determination of the cost of material issued and the cost of the inventory.
LEVELS OF INVENTORY Levels of inventory means inventory kept in store room (i.e. raw material).
To analyse levels of inventory we compute the following-
1.       REORDER LEVEL An inventory order should be placed with the supplier it inventory teach at this level. Generally reorder level is determined in a manner to avoid shortage.
Reorder level = maximum consumption/usage X maximum lead time/reorder period/delivery period
2.       MAXIMUM LEVEL It is the level of inventory beyond which inventory cannot exceed in the store room.
Maximum level= reorder level + reorder qty (i.e. EOQ) – minimum consumption X minimum lead time.
3.       MINIMUM LEVEL It is the ideal inventory level at which ordered material should be received
Minimum level= reorder level – normal consumption X normal lead time
4.       AVERAGE LEVEL It is the level of inventory held in the store room on an average throughout the year.
5.       DANGER LEVEL If an inventory order is not placed at reorder level still it may avoid major shortage, however if it is not placed at danger level shortage is bound to occur.
Danger level = normal consumption X lead time for emergency purchases

#### Karan Gaba

 Phone: 98********30 Email: kar********@gmail.com Address: Lajpat nagar Institute:

I take classes for last ten yrs for CA, CS, CMA Inter, B Com Hons/Prog. I have over 350 students scoring full at D.U. I have a teaching experience of ten yrs. I am a B Com Hons graduate from Delhi University, also i m a semi qualified Chartered Accountant (Group 2) CA Final cleared.

b.com

5 year

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