Question

L. Houts Plastics is a large manufacturer of injection-molded plastics in North Carolina. An investigation of the company's manufacturing facility in Charlotte yields the information presented in the table below. How would the plant classify these items according to an ABC classification system? (Round dollar volume to the nearest whole number and percentage of dollar volume to two decimal places.) % of Dollar Volume 37.81 L. Houts Plastics Charlotte Inventory Levels Value Dollar Item Code Avg. Inventory (units) ($/unit) Volume 1289 400 3.25 2347 4.00 1,200 2349 2.50 2363 1.80 2394 1.75 2395 1.75 6782 1.15 7844 2.05 300 9.45 3.31 0.72 0.78 Enter your answer in the edit fields and then click Check Answer. 2 parts remaining Clear All Check Answer

Answer 1

The theory behind an ABC analysis is straightforward. An ABC classification system works on the following three types of classifications based on the percentage of inventory VS the percentage of dollar volume:

Item A has a high dollar value and low inventory value

item B has a medium dollar and medium inventory value

Item C has a low dollar and high inventory value

ITEM	UNITS	COST/UNIT	DOLLAR VOL	% OF DOLLAR VOL	INVENTORY %	CLASSIFICATION
1289	400	3.25	1300	40.96	38.83	A
2347	300	4	1200	37.81	29.13	A
2349	120	2.5	300	9.45	11.65	B
2363	65	1.8	117	3.69	6.31	C
2394	60	1.75	105	3.31	5.83	C
2395	30	1.75	52.5	1.65	2.91	C
6782	20	1.15	23	0.72	1.94	C
7844	12	2.05	24.6	0.78	1.17	C
8210	10	2	20	0.63	0.97	C
8310	7	2	14	0.44	0.68	C
9111	6	3	18	0.57	0.58	C
	1030		3174