Maximum Level or Maximum Limit of Stock
Maximum Level or Maximum Limit of Stock:
Learning Objective:
 Definite and explain maximum limit or maximum level of stock.
 How is maximum limit or maximum level calculated?
Definition and Explanation:
The maximum stock limit is upper level of the inventory and the quantity that must not be exceeded without specific authority from management. In other words, the maximum stock level is that quantity of material above which the stock of any item should not normally be allowed to go. This level is fixed after taking into account such factors as: capital, rate of consumption of materials, storage space available, insurance cost, risk of deterioration and obsolescence and economic order quantity.
Formula:
Maximum level or maximum limit can be calculated by the help of following formula:
Maximum limit or level = Reorder level or ordering point – Minimum usage × Minimum reorder period + Economic order quantity
Example:
Normal usage  100 units per day  
Maximum usage  130 units per day  
Minimum usage  70 units per day  
Reorder period  25 to 30 days  
Economic order quantity  5,000 units  
Calculate maximum limit or level. In order to calculate maximum limit of stock we must calculate reorder point or reorder level first. Ordering point or reorder level = Maximum daily or weekly or monthly usage × Maximum reorder = 130 × 30 = 39,000 units Calculation:

very nice information