Microlesson · 5-min read

Calculating Annual Consumption (Three Methods)

## Three Different Ways to Calculate Annual Consumption

Annual consumption is the denominator/driver of EOQ and many inventory formulas. Depending on what the question gives, use one of these three approaches in order of priority:

#	Situation	Method
1	Annual consumption is directly given	Use it as-is.
2	Finished goods quantity + material per unit given	Multiply: FG units × material per FG unit.
3	Average weekly/monthly consumption given	Multiply: avg × number of weeks/months in a year (e.g., × 52 or × 12). Use only if methods 1 and 2 don't apply.

Worked example

### Example 1

Method 2: FG sold = 100 units; Material A required per unit = 2 kg.

Annual consumption = 2 × 100 = 200 kg

### Example 2

Method 3: Average consumption = 10 kg/week.

Annual consumption = 10 × 52 = 520 kg

(Use this only when methods 1 and 2 are unavailable.)

⚠️ Common exam mistakes

Multiplying weekly consumption by 50 instead of 52 weeks.
Falling back to Method 3 when finished goods data was already provided.
Forgetting to convert monthly figures (× 12) when computing annual.

Reference:

Average Stock Level

Consumption Levels

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