Your manager asks you to perform ABC Analysis to increase the efficiency of your
ID: 2423129 • Letter: Y
Question
Your manager asks you to perform ABC Analysis to increase the efficiency of your company. He provides following data related to hits, profit per unit, and total quantity sold in terms of each item; then asks an analysis based on hits, sales quantity, and total profit. Perform ABC Analysis for your company with A items = top 50%, B items = next 35%, C items are the remaining ones. Manager believes that profit made from a product is three times more important than sales volume of the product. (Assume A=5, B=3, and C=1). Explain reasons for a company to keep inventory.
ITEM
Hits
Profit Per Product
Quantity Sold Per Year
1
3
30
12
2
30
15
35
4
5
20
85
5
2
9
79
3
67
6
87
6
95
5
95
7
10
15
100
8
19
20
15
9
16
5
225
10
16
3
35
ITEM
Hits
Profit Per Product
Quantity Sold Per Year
1
3
30
12
2
30
15
35
4
5
20
85
5
2
9
79
3
67
6
87
6
95
5
95
7
10
15
100
8
19
20
15
9
16
5
225
10
16
3
35
Explanation / Answer
Solution:
ABC Analysis Chart:
% of profit = Profit per annum / Total profit
Items as per descending order based on the percentage of profits:
A - top 50%
B - next 35%'
C - remaining
Result of Analysis:
Item no. Hits Profit Qty sold p.a profit per annum % of profit/total profit 1 3 30 12 360 4.92 2 30 15 35 525 7.17 4 5 20 85 1,700 23.21 5 2 9 79 711 9.71 3 67 6 87 522 7.13 6 95 5 95 475 6.49 7 10 15 100 1,500 20.48 8 19 20 15 300 4.10 9 16 5 225 1,125 15.36 10 16 3 35 105 1.43 Total profit 7,323 100Related Questions
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