ID ezto.mheducation.com value 25.00 points Problem 11-42 DAT, Inc., produces dig
ID: 326750 • Letter: I
Question
ID ezto.mheducation.com value 25.00 points Problem 11-42 DAT, Inc., produces digital audiotapes to be used in the consumer audio division. DAT lacks sufficient personnel in its inventory supply section to closely control each item stocked, so it has asked you to determine an ABC classification. Here is a sample from the inventory records: AVERAGE MONTHLY DEMAND ITEM PRICE PER UNIT 1,600 4,900 $ 12.00 21.00 3.00 4,700 4,600 4.00 1,900 1,200 10.00 13.00 17.00 10 Develop an ABC classification for these 10 items. ltem Monthly Usage ($) Class (Click to selectl (Click to select Click to sc ect) (Click to select (Click to select (Click to select (Click to select (Click to sc ect) (Click to select (Click to seilect) 10 References eBook & Resources Worksheet Difficulity: IntermediateExplanation / Answer
Please find below table highlighting A-B-C classification for each item:
Item no
Unit cost($)
Usage
Total value($)
Cumultative value($)
Percentage of Cumulative value ( $)
ABC Classification
7
29
4600
133400
133400
39.90
A
2
21
4900
102900
236300
70.69
A
9
13
1900
24700
261000
78.07
A
10
17
1200
20400
281400
84.18
B
1
12
1600
19200
300600
89.92
B
6
4
4700
18800
319400
95.54
C
4
8
700
5600
325000
97.22
C
8
10
500
5000
330000
98.71
C
3
3
900
2700
332700
99.52
C
5
2
800
1600
334300
100.00
C
TOTAL:
334300
Following formula and methods have been adopted :
a)We have calculated “Total Value “ for each item = Usage x Unit cost ( $)
b)Upon calculating “Total value “ for each item, we have arranged the items in descending order of Total Value
c)Upon arranging the items in descending order of total value , we have calculated Cumulative value against each item
Cumulative value against each item is equal to sum of Total values of all items starting from beginning upto that item
d)Percentage of Cumulative value for any item = Total value / Cumulative x 100
e)For purpose of classification ,
Let us assume that all items whose percentage of cumulative values summed up upto 80% are A class items
All items ( beyond A class items ) whose percentage of cumulative values sum up upto 90% are B class items
All items ( beyond B class items ) whose percentage of cumulative values sum up upto 100 % are C class items
Accordingly , there are :
3 numbers A class items - items 7, 2 and 9
2 numbers B class items – item 10 and 1
5 numbers of C class items - ITEM 6,4,8,3 and 5
ANSWER :
B
2
A
3
C
4
C
5
C
6
C
7
A
8
C
9
A
10
B
Item no
Unit cost($)
Usage
Total value($)
Cumultative value($)
Percentage of Cumulative value ( $)
ABC Classification
7
29
4600
133400
133400
39.90
A
2
21
4900
102900
236300
70.69
A
9
13
1900
24700
261000
78.07
A
10
17
1200
20400
281400
84.18
B
1
12
1600
19200
300600
89.92
B
6
4
4700
18800
319400
95.54
C
4
8
700
5600
325000
97.22
C
8
10
500
5000
330000
98.71
C
3
3
900
2700
332700
99.52
C
5
2
800
1600
334300
100.00
C
TOTAL:
334300