Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items.
ID: 470957 • Letter: L
Question
Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items. Each of these items has a unique demand pattern and may require a different kind of inventory management system. The annual demand pattern and the unit cost of these items are given in the following table. Classify the items in A, B, and C categories according to annual dollar usage.
Item 7 will be classified as:
Item Type Annual Usagein thousands Unit Cost
in Dollars Item 1 10 $2.50 Item 2 30 $1.25 Item 3 20 $16 Item 4 10 $0.75 Item 5 20 $3.00 Item 6 33 $2.50 Item 7 60 $14.25 Item 8 22 $10.00 Item 9 100 $2.75 Item 10 500 $4.25
Explanation / Answer
ITEM USAGE UNITCOST ANNUAL DOLLAR USAGE
Item 1 10 $2.50 25---C
Item 2 30 $1.25 37.5----C
Item 3 20 $16 320 ----B
Item 4 10 $0.75 7.5-----C
Item 5 20 $3.00 60----C
Item 6 33 $2.50 82.5-----C
Item 7 60 $14.25 855 -A
Item 8 22 $10.00 220----B
Item 9 100 $2.75 275 ----B
Item 10 500 $4.25 2125 -A
Item 7 will be classified as: A
Item 6 will be classified as:C
Item 8 will be classified as:B
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