Problem 13.46 The EastCoasters Bicycle Shop stocks bikes; helmets; clothing; a v
ID: 375165 • Letter: P
Question
Problem 13.46 The EastCoasters Bicycle Shop stocks bikes; helmets; clothing; a variety of bike parts including chains, gears, tires, wheels; and biking accessories. The shop is in a storefront location on a busy street and it has very limited storage space for inventory. It often runs out of items and is unable to serve customers. To help manage its inventory the shop would like to classify the stock using the ABC system. Following is a list of items the shop stocks and the annual demand and unit value for each:Explanation / Answer
First find the total cost by multiplying Annual Demand with Unit cost.
Then find the % contribution of each item by dividing each item's cost with total annual cost
Then arrange the items in descending order of % contribution as:
Example: Item 1 Annual cost = 10*8 = 80
Total Annual cost = 117968
% contribution = 80/117968*100 = 0.1%
A: Those whose contribution is in starting 75%
B: Those who consitute next 20%
C: Last 5% of the item
Item Number Annual Demand Unit cost Total cost % contribution 13 7 2300 16100 13.6% 4 9 1230 11070 9.4% 10 27 350 9450 8.0% 20 10 935 9350 7.9% 7 19 420 7980 6.8% 22 5 1400 7000 5.9% 30 9 705 6345 5.4% 25 32 160 5120 4.3% 19 8 610 4880 4.1% 26 101 45 4545 3.9% 23 5 900 4500 3.8% 15 6 665 3990 3.4% 24 46 67 3082 2.6% 5 4 760 3040 2.6% 17 110 23 2530 2.1% 14 10 245 2450 2.1% 6 3 810 2430 2.1% 8 56 35 1960 1.7% 21 7 270 1890 1.6% 9 105 17 1785 1.5% 12 12 115 1380 1.2% 18 74 18 1332 1.1% 3 36 30 1080 0.9% 27 83 12 996 0.8% 28 54 16 864 0.7% 11 19 36 684 0.6% 29 14 42 588 0.5% 16 18 28 504 0.4% 32 16 26 416 0.4% 2 18 16 288 0.2% 31 7 37 259 0.2% 1 10 8 80 0.1%