Question

Problem 11-42 (Static) DAT, Inc. produces digital audiotapes to be used in the consumer audio division. DAT lacks sufficient personnel in its inventory supply section to closely control each item stocked, so it has asked you to determine an ABC classification. Here is a sample from the inventory records: AVERAGE PRICE PER ITEM MONTHLY DEMAND UNIT $6.00 1 700 200 4.00 3 2,000 12.00 20.00 4 1,100 4,000 100 21.00 6 10.00 2.00 7 3,000 2,500 500 8 1.00 10.00 2.00 9 10 1,000 Develop an ABC classification for these 10 items. Monthly Usage ($) Class Item 1 2 3 5 6 7 8

Answer 1

Item	Percentage of Total Usage = (monthly usage /Total usage)*100	Classification
1	2.77	B
2	0.53	C
3	15.84	A
4	14.52	A
5	55.45	A
6	0.66	C
7	3.96	B
8	1.65	C
9	3.30	B
10	1.32	C

Working:

Item	Average monthly Demand	Price per Unit ($)	Monthly usage = Monthly Demand * unit price ($)	Percentage of Total Usage (%) = (Monthly usage /Total usage)*100
1	700	6	4,200	2.77%
2	200	4	800	0.53%
3	2000	12	24,000	15.84%
4	1100	20	22,000	14.52%
5	4,000	21	84,000	55.45%
6	100	10	1,000	0.66%
7	3000	2	6,000	3.96%
8	2500	1	2,500	1.65%
9	500	10	5,000	3.30%
10	1,000	2	2,000	1.32%
Total Usage			151,500

Item	Percentage of Total Usage = (monthly usage /Total usage)*100	Total Percentage	Classification
5	55.45	85.81	A
3	15.84
4	14.52
7	3.96	10.03	B
9	3.30
1	2.77
8	1.65	4.16	C
10	1.32
6	0.66
2	0.53