Concept And Meaning Of Average Stock Level And Its Calculation

Average Stock level shows the average stock held by a firm. The average stock level can be calculated with the help of following formula.

Average Stock Level = Minimum Level + (1/2Re-order Quantity)
OR
Average Stock Level = (Minimum Level + Maximum Level)/2

Illustration

Re-order quantity = 2000 units
Minimum Level = 500 units
Average stock level = ?

Solution,
Average stock level = Minimum level + 1/2 x Re-order quantity
= 500 + 1/2 x 2000
= 500+ 1000
= 1500 units.