Judy Stamm inventory. However, because her time is limited, she cannot carefully
ID: 365616 • Letter: J
Question
Judy Stamm inventory. However, because her time is limited, she cannot carefully evaluate the inventory policy for all products. Judy wants to classify the items according to dollars invested in them. The following table provides information about the 10 items that she carries opened a new beauty-products retail store. There are numerous items in inventory, and Judy knows that there are costs associated with Based on the percentages of dollar volume, complete the table below by using ABC analysis to classify these items into categories A, B, and C Item Number Unit Cost Demand (units) Dollar VolumeClassification $3,200 $9,600 2,100 $2,000 $1,600 $3,000 $1,200 E102 $4.00 1,200 700 ,000 D23 $8.00 D27$3.00 R02 $2.00 R19 $8.00 107 $6.00 S123 $1.00 $7.00 U23 $1.00 V75 $4.00 500 ,200 800 1,500 1,500 U11Explanation / Answer
The ABC analysis will be done in few steps.
In first step, the dollar volume will be calculated for each item of the inventory.
In the second step, each item will be organized in descending order (highest to lowest) and % of dollar volume will be calculated for each of the item in the inventory.
In the third step, cumulative % of the dollar volume will be calculated. First 70% will be assigned to A, then 70% to 90% will go to B and remaining 10% will go to C category.
Above clasification is the standard ABC distrbution of inventory.
Though, in the question some of the items are already classified as A or C. According to that table, the classifcation will be as follows:
Item No. Unit cost ($) Demand Dollar Volume ($) E102 4 800 3200 D23 8 1200 9600 D27 3 700 2100 R02 2 1000 2000 R19 8 200 1600 S107 6 500 3000 S123 1 1200 1200 U11 7 800 5600 U23 1 1500 1500 V75 4 1500 6000 Total = 35800Related Questions
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