Question: Instructions ABC analysis is an inventory categorization method which consists of dividing items into three categories (A, B, C): Class A represents the most valuable
Instructions
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.
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 (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
Describe three advantages of ABC analysis.
Prepare this assignment in a Microsoft Excel document. Submit this assignment to your instructor via the drop box. This assignment is worth 30 marks.
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