dolution
dolution.
ABC analysis is an inventory categorization method which consists of dividing items into three categories (A, B, C):
- Class A represents the most valuable items
- Class C represents the least valuable ones
This method aims to draw managers’ attention to the critical few (A-items) not to the trivial many (C-items). The table below provides a brief summary of ABC analysis.
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Percentage of items |
Percentage value of annual usage |
||
|
Class A items |
About 20% |
About 80% |
Close day to day control |
|
Class B items |
About 30% |
About 15% |
Regular review |
|
Class C items |
About 50% |
About 5% |
Infrequent review |
Directions: Answer the questions below.
- Perform ABC analysis for the following information based on usage as percent of total usage. Use Excel to perform the ABC analysis. Apply formulas for calculation (don’t type numbers/calculated answer where formula is applicable.)
|
Item number |
Unit cost |
Annual demand |
Total cost per year |
|
101 |
5 |
48,000 |
240,000 |
|
102 |
11 |
2,000 |
22,000 |
|
103 |
15 |
300 |
4,500 |
|
104 |
8 |
800 |
6,400 |
|
105 |
7 |
4,800 |
33,600 |
|
106 |
16 |
1,200 |
19,200 |
|
107 |
20 |
18,000 |
360,000 |
|
108 |
4 |
300 |
1,200 |
|
109 |
9 |
5,000 |
45,000 |
|
110 |
12 |
500 |
6,000 |
|
Total usage |
737,900 |
- Describe three advantages of ABC analysis.
Prepare this assignment in a Microsoft Excel document.
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