Material Cost Question:

This is the top level which indicates that level of material stock should not exceed this level. If it does, it may involve blocking of funds in inventory which may be used for some other useful purposes. This level is fixed after considering following factors:

-Maximum Usage
-Lead Time
-Storage facilities available
-Prices of material
-Other various costs involved like insurance, storage cost etc.
-Availability of funds for procurement of materials
-Nature of material
- EOQ