Use this method in the Order Point Report (ROP) to set the order point to a certain level based on the cost of the item. You may want to use this method for high cost items (for example, appliances). You may want to keep only two or three on hand, regardless of other factors.
For example: You carry refrigerators, washers, and dryers. Because of their cost, you want to stock only two of each. In the first space (after If Cost Is), type 250. In the second space (after Set Order Point to), type 2. When you run the report, the system sets the order point to 2 for each item whose cost is $250 or more.
You can use Method 1 with Methods 2 or 3. If you combine methods, the system uses the methods in numerical order. For each item, if the first method applies, the system ignores the second method. If the first method does not apply, the system uses the second method.
For example: You use Methods 1 and 3. For Method 1, you want to set the order point to 1 for each item whose cost is $175 or higher. For each item, the system uses Method 1 first.
The system uses Method 1 for SKU 113113. Its cost is $193. Since the cost is greater than $175, the system sets the order point to 1. Since SKU 113113 meets the criteria for Method 1, the system does not use Method 3 to calculate the item's order point.
The system uses Method 1 for SKU 444089. Its cost is $8.21. Since the cost is less than $175, the system uses Method 3 to calculate the item's order point.
If you fill in the Minimum New OP field, and it is higher than the order point you enter for Method 1, the system uses the Minimum New OP field.
For example: the Minimum New OP field is 2. On the OP Methods page, you set the order point to 1 for each item whose cost is $200 or more. SKU 753144 costs $210. Even though it meets the criteria for Method 1, the system sets the order point to 2. Since the Minimum New OP field is greater than the Method 1 order point, the system uses it.