Problem 3 DAT, Inc., is considering the use of ABC analysis to classify SKUs in
ID: 366875 • Letter: P
Question
Problem 3
DAT, Inc., is considering the use of ABC analysis to classify SKUs in three categories: those that will be delivered daily from their supplier (class A item), those that will be controlled using a continuous review system (class B items), and those that will be held in a two-bin system (class C items). DAT Inc. has asked you to determine the ABC classification.
The table below shows the data for 20 inventoried items.
SKU code
Projected Annual Demand
Unit Cost
1
1500
$ 50.00
2
6450
$ 20.00
3
5500
$ 60.00
4
200
$ 12.50
5
2000
$ 350.00
6
84
$ 250.00
7
800
$ 80.00
8
300
$ 5.00
9
10000
$ 35.00
10
2000
$ 65.00
11
5000
$ 25.00
12
3250
$ 125.00
13
30000
$ 1.50
14
2900
$ 10.00
15
800
$ 15.00
16
1400
$ 100.00
17
1470
$ 100.00
18
8200
$ 15.00
19
12500
$ 0.16
20
5000
$ 0.20
SKU code
Projected Annual Demand
Unit Cost
1
1500
$ 50.00
2
6450
$ 20.00
3
5500
$ 60.00
4
200
$ 12.50
5
2000
$ 350.00
6
84
$ 250.00
7
800
$ 80.00
8
300
$ 5.00
9
10000
$ 35.00
10
2000
$ 65.00
11
5000
$ 25.00
12
3250
$ 125.00
13
30000
$ 1.50
14
2900
$ 10.00
15
800
$ 15.00
16
1400
$ 100.00
17
1470
$ 100.00
18
8200
$ 15.00
19
12500
$ 0.16
20
5000
$ 0.20
Explanation / Answer
Total
SKU code Projected Annual Demand Unit Cost Product %age of Total 1 1500 50 75000 2.6% B 2 6450 20 129000 4.6% B 3 5500 60 330000 11.6% A 4 200 12.5 2500 0.1% C 5 2000 350 700000 24.7% A 6 84 250 21000 0.7% C 7 800 80 64000 2.3% C 8 300 5 1500 0.1% C 9 10000 35.00 350000 12.4% A 10 2000 65.00 130000 4.6% B 11 5000 25.00 125000 4.4% B 12 3250 125 406250 14.3% A 13 30000 1.50 45000 1.6% C 14 2900 10.00 29000 1.0% C 15 800 15.00 12000 0.4% C 16 1400 100.00 140000 4.9% B 17 1470 100.00 147000 5.2% B 18 8200 15.00 123000 4.3% B 19 12500 0.16 2000 0.1% C 20 5000 0.2 1000 0.0% CTotal
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