## Consumption Levels
Consumption = amount of raw material consumed to produce the finished goods.
Three standard levels are used in inventory formulas:
| Level | Description |
|---|---|
| Minimum Consumption | Lowest usage rate (e.g., geysers in summer) |
| Average Consumption | (Maximum + Minimum) ÷ 2 |
| Maximum Consumption | Highest usage rate (e.g., ACs in winter — analogy: peak season usage) |
### Why these levels matter
- Maximum consumption → Re-order Level (ensures you re-order before stock-out under peak demand)
- Minimum consumption → Maximum Stock (ensures you don't overstock when usage is slow)
- Average consumption → Minimum Stock and Danger Level