## Function

Factors are used by several of the reports in the Inventory Control module. Use this option to change the factors involved with the system for calculating EOQs, Reorder Points, and percentage points used for ABC Analysis reports. Refer to Appendix B - EOQ, Order Point & Safety Stock Calculations for more information regarding factors used for calculating inventory.

Select Inventory Factors from the Parameters menu.

Inventory Factors - setup and carrying costs

In the Carrying Cost Percentage field...

• Enter the estimated annual carrying cost per unit percentage.

This cost amount is determined by management through analysis of several factors including interest on inventory investment, obsolescence write-offs, and space costs. The carrying cost is used in the computation of the EOQ.

#### Carrying Cost Example

An industry standard for carrying cost is the cost of money plus 20%. If current interest paid is 13%, the carrying cost is entered as 33%. Refer to Appendix B for a detailed description of EOQ computation.

In the Set-Up Cost field...

• Enter the amount representing the fixed costs of setting up, expediting, receiving, and paying an order from your suppliers.

This figure is used in the computation of the Economic Order Quantity (EOQ).

In the ABC Level fields...

Display only. Shows the letter assigned to the level.

In the Percent fields...

• Enter a number which represents the level’s percentage of items on the ABC Analysis Report.

NOTE: The percentages for all factors must equal 100. Refer to Appendix B for more information.

In the Factor fields...

• Enter the factor used in computing the reorder point for this level’s items.

Factors are used in the calculation of the reorder point for an item, and to provide a way to “weight” the current month versus the prior 3 years’ average. A higher factor (0 to 100 is possible) will more heavily weight the current month (extrapolated), while a lower factor will more heavily weight the average from the prior 3 months. A factor of zero will consider only one years’ average, and a factor of 100 will consider only the current month’s usage.

If the percentages you entered for the factors do not total 100, the system issues a warning.

When done making selections...

• Click to save the changes.

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