Costing query

Daily stock requirements = 500 units

lead time to order a fresh lot = 20 days (time between ordering and goods arriving)

recorder level = 500 x 20 = 10,000 (means when your inventory reaches at 10,000 units, you got to give order for the fresh lot because it will take 20 days to arrive. You don't want to be out of units when the new lot arrives since each day you are using 500 units)

normal requirement = 400 units

lead time to order a fresh lot = 12 average

minimum level = 10,000 - 400 x 12 = 5,200 units

agreed with Mihir....