ABC analysis is an inventory categorization method which consists of dividing items into three categories (A, B, C):

1. Class A represents the most valuable items
2. 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.

	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.

1. 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 (dont 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

2. Describe three advantages of ABC analysis.

Prepare this assignment in a Microsoft Excel document.