Base stock method definition
/What is the Base Stock Method in Inventory Accounting?
The base stock method is a valuation technique for the inventory asset, where the minimum amount of inventory needed to maintain operations is recorded at its acquisition cost, while the LIFO method is applied to all additional inventory. This approach is not acceptable under generally accepted accounting principles.
What is the Base Stock Method in Inventory Management?
The base stock method is used to calculate the point at which additional units of stock should be reordered. This approach balances the need to keep some inventory on hand with the cost of that inventory. This approach is comprised of the base stock (the minimum inventory level considered acceptable to meet demand), plus lead time demand, which is the additional amount of demand that may arise while restocking goods are in transit from the supplier.