L Houts Plastics is a large manufacturer of injection-molded plastics in North C
ID: 330841 • Letter: L
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 yield 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) L. Houts Plastics Charlotte Inventory Levels Dollar % of Dollar Volume Avg. Value 1289 2347 2349 2363 3.75 4.00 1200 37.34 2.50 1.80 1.75 1.75 1.15 2.05 2.00 2.00 3.00 9.33 3.27 0.72 120 300 60 35 20 12 105 2395 6782 23 25 0.77 8210 8310 9111 0 44 056 18 3.214 For the tollowing three questions, consider only tems 1289 2349, and 8210 from the above table for relative classification these are some of the items for which you computed the metrics) Based on the percentages of dollar volume, item number 1289 should be classified as tem number 2349 should be cliassified as tem number 8210 should be classified as percentages of dolar volume, tem number 1289 should be classied asExplanation / Answer
Dollar volume of 1289 = 360 x 3.75 = 1350
Therefore, percentage of Dollar volume = 1350 / 3214 x 100 = 42 %
Dollar volume of 2363 = 60 x 1.80 = 108
Therefore, percentage of Dollar Volume = 108/3214 x 100 = 3.36%
Dollar Volume of 2395 = 35 x 1.75 = 61.25
Therefore, percentage of dollar volume = 61.25 / 3214 x 100 = 1.90%
Dollar volume of 8210 = 5 x 2 = 10
Therefore , percentage of dollar volume = 10 /3214 x 100 = 0.31%
We fix threshold limit for A-B-C- classification as per following :
All items ( in descending order of percentage of dollar volume ) cumulatively consisting 80% of total Dollar volume should be classified as A class item
All items ( in descending order of percentage of dollar volume ) barring A class items cumulatively consisting 90% of total Dollar volume should be classified as B class items
Rest of the items ( ie between 90 % and 100% in terms of cumulative value ) to be classified as C class items
Thus 1289 and 2347 cumulatively consists of = 42 + 37.34 = 79.34 % of Dollar volume should be classified as A class items
Item 2349 having percentage of Dollar Volume of 9.33% should be classified as B class item
Together , they make = 79.34 + 9.33 = 88.67% of total Dollar Volume. It is to be noted that if we add percentage of Dollar volume for 2363 to above, total percentage of Dollar volume = 88.67% + 3.36% = 92.03 %. Since this exceeds the threshold limit of 90% required to be classified as B class item, we cannot classify 2363 as B class item.
Therefore, all balance items to be classified as C class items
Item number 1289 should be classified as
A
Item number 2349 should be classified as
B
Item number 8210 should be classified as
C
Item number 1289 should be classified as
A
Item number 2349 should be classified as
B
Item number 8210 should be classified as
C
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