MAQ Corporation, a major producer of consumer electronics equipment, is currentl

Question

MAQ Corporation, a major producer of consumer electronics equipment, is currently faced with a rapidly growing product line and its associated inventory problems. MAQ’s president, Mary Semerod, has decided to initiate a program to analyze the company’s inventory requirements, utilizing different inventory techniques. The first phase of this program consists of an ABC analysis of the company’s product line (shown in the table below).

Sales Data (One-Year Period)

Product #

Units Sold

Price Per Unit

Profit Per Unit

SR101

14,500

#250

$50.50

SR103

750

2,000

330.00

SR105

1,600

600

270.00

SR201

30

2,250

877.50

SR203

10

3,000

1,750.00

SR205

9,250

500

125.00

SR301

1000

650

195.00

SR303

550

700

196.00

SR305

3,000

920

100.00

SR500

100

1,100

440.00

Note that these values vary from those given in text.

     Ms. Semerod needs professional advice concerning the appropriate criteria to use in the classification of their inventory, as well as in developing appropriate cutoff levels for each class of inventory (A, B, and C).   To solve this dilemma, Ms. Semerod has contracted the service of your logistics consulting firm to perform the inventory analysis.

    In particular, MAC Corporation has hired your firm to classify their inventory in two ways: by revenue, and by profit. For each, they have asked you to rank their products from most important to least important, then identify which products fall within each of the three categories.   For each criteria, present a table of calculations, then explain your calculation approach.

   Conclude your analysis by making a recommendation to Ms. Semerod as to which of the two inventory classification criteria would be the best to use by MAQ, and explain your reasons for your recommendation.

    Ms. Semerod will be expecting your report in the form of an executive memo, due to her office by March 18, 2018.

Sales Data (One-Year Period)

Product #

Units Sold

Price Per Unit

Profit Per Unit

SR101

14,500

#250

$50.50

SR103

750

2,000

330.00

SR105

1,600

600

270.00

SR201

30

2,250

877.50

SR203

10

3,000

1,750.00

SR205

9,250

500

125.00

SR301

1000

650

195.00

SR303

550

700

196.00

SR305

3,000

920

100.00

SR500

100

1,100

440.00

Explanation / Answer

MAC Corporation- Classification basis Profit Per unit Product # Units Sold Profit Per Unit Profit on units sold % Profit on units sold Cummulative % Profit on units sold Classification SR205 9,250 $    125.00 $1,156,250.00 35% 35% C SR101 14,500 $      50.50 $732,250.00 22% 58% C SR105 1,600 $    270.00 $432,000.00 13% 71% C SR305 3,000 $    100.00 $300,000.00 9% 80% C SR103 750 $    330.00 $247,500.00 8% 88% B SR301 1000 $    195.00 $195,000.00 6% 94% B SR303 550 $    196.00 $107,800.00 3% 97% B SR500 100 $    440.00 $44,000.00 1% 99% A SR201 30 $    877.50 $26,325.00 1% 99% A SR203 10 $1,750.00 $17,500.00 1% 100% A $3,258,625.00 MAC Corporation- Classification basis Price Per unit Product # Units Sold Price Per Unit Annual Value Annual Value % Cummulative Annual Value % Classification SR205 9,250 $    500.00 $4,625,000.00 31% 31% A SR101 14,500 $    250.00 $3,625,000.00 25% 56% A SR305 3,000 $    920.00 $2,760,000.00 19% 75% A SR103 750 $2,000.00 $1,500,000.00 10% 85% B SR105 1,600 $    600.00 $960,000.00 7% 92% B SR301 1000 $    650.00 $650,000.00 4% 96% B SR303 550 $    700.00 $385,000.00 3% 99% C SR500 100 $1,100.00 $110,000.00 1% 99% C SR201 30 $2,250.00 $67,500.00 0% 100% C SR203 10 $3,000.00 $30,000.00 0% 100% C $30,790.00 $14,712,500.00

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