DAT, Inc., produces digital audiotapes to be used in the consumer audio division
ID: 387123 • Letter: D
Question
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:
Develop an ABC classification for these 10 items.
ITEM AVERAGEMONTHLY DEMAND PRICE PER UNIT 1 3,000 $ 10.00 2 4,600 25.00 3 500 12.00 4 300 10.00 5 2,900 9.00 6 700 8.00 7 2,500 11.00 8 600 7.00 9 3,300 28.00 10 4,200 6.00
Explanation / Answer
The ABC classification for inventory management is based on annual/monthly issue value of the inventory items in term of dollar where items are grouped into three categories as per their importance.
ABC classification:
Top 60-80% items in term of value considered high value in value and classified as A
Next 15-30% items in term of value considered intermediary value and classified as B
Remaining 5 - 10 % items in term of value considered low value and classified as C
ITEM AVERAGE MONTHLY DEMAND (D) PRICE PER UNIT (P) Total value of each Item ($) (D *P) % value of each item out of total ABC classification 1 3,000 $10.00 $30,000.00 8.96% B 2 4,600 25 $115,000.00 34.33% A 3 500 12 $6,000.00 1.79% C 4 300 10 $3,000.00 0.90% C 5 2,900 9 $26,100.00 7.79% B 6 700 8 $5,600.00 1.67% C 7 2,500 11 $27,500.00 8.21% B 8 600 7 $4,200.00 1.25% C 9 3,300 28 $92,400.00 27.58% A 10 4,200 6 $25,200.00 7.52% B Total $335,000.00Related Questions
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