Minimum Limit or Minimum Level of Stock
Minimum Limit or Minimum Level of Stock:
Learning Objective:
 Definite and explain minimum limit or minimum level of stock.
 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 or equation:
Minimum limit or level = Reorder level or ordering point – Average or normal usage × Normal reorder period
Or the formula can be written as:
Minimum limit or level = Reorder level or ordering point – Average usage for Normal period
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  
Calculate: minimum limit or levelTo calculate minimum limit of materials we must calculate reorder point or reorder level first. Calculation:
