P2. (5 pts) Bonnie\'s Bikes manufactures bikes to customers\' orders for all age

Question

P2. (5 pts) Bonnie's Bikes manufactures bikes to customers' orders for all ages and budgets. When

a customer calls in an order or sends it via the Internet, Bonnie's Bikes will try to build a bike to

order and ship it the next day. There follows a listing of the major component categories. The

average cost of a component and the average demand for each category are also listed. Using ABC

analysis, help Bonnie's Bikes sort out which items to pay more attention to.

170 100 80 000 000 200 170 200 200 100 170 90 30 500 100 55 35 000 500 100 212211 2 Ul 0 0 0 0 1 1 07010 3 0080420550 0 0 0 0 0 0 0 0 0 0 4 3 0 2 0 2 2 10 11 0 055000 654 1213 t-6 4 0 a222 al 3 2220 It T T T T T S

Explanation / Answer

ABC Analysis:

Calculate the average dollar value by multiplying average unit cost with average demand.

Sort the items in descending order of average dollar value.

Calculate % of total by dividing the average dollar value by total dollar value.

Calculate cumulative % as running sum of % of total

Resulting table is as follows

Items comprising top 80% of total dollar value are classified as A class items

Items comprising the next 15% of total dollar value are classified as B class items

Items comprising the last 5% of total dollar value are classified as C class items

Resulting classification is as follows

Bonnie's Bikes need to pay more attention to A class items - Frames (Men's), Derailer, Frames (Children's), and Spokes.

Item Category Average Unit Cost Average Demand Dollar Value % of Total Cumulative % Frames (Men's) 55 500 27500 40.40% 40.40% Derailer 20 1000 20000 29.38% 69.78% Frames (Children's) 45 100 4500 6.61% 76.39% Spokes 0.14 22000 3080 4.52% 80.91% Forks 40 55 2200 3.23% 84.14% Tire Tubes 2 1000 2000 2.94% 87.08% Tires (26") 11 170 1870 2.75% 89.83% Pumps 11 170 1870 2.75% 92.57% Frames (Women's) 60 30 1800 2.64% 95.22% Chains 1 500 500 0.73% 95.95% Tires (24") 4 100 400 0.59% 96.54% Rims (24") 2 200 400 0.59% 97.13% Rims (26") 2.12 170 360.4 0.53% 97.66% Rims (20") 1.75 200 350 0.51% 98.17% Fenders 10 35 350 0.51% 98.69% Bells 3 100 300 0.44% 99.13% Lights 3 90 270 0.40% 99.52% Tires (20") 3 80 240 0.35% 99.88% Tire Valves 0.08 1000 80 0.12% 99.99% Reflectors 0.05 100 5 0.01% 100.00% Total Dollar Value 68075

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.