Question

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:

ITEM	AVERAGE MONTHLY DEMAND	PRICE PER UNIT
1	1,600	$	12.00
2	4,900		21.00
3	900		3.00
4	700		8.00
5	800		2.00
6	4,700		4.00
7	4,600		29.00
8	500		10.00
9	1,900		13.00
10	1,200		17.00

Develop an ABC classification for these 10 items.

Answer 1

ITEM A = MORE THAN 25% CONTRIBUTION

ITEM B = MORE THAN 5% BUT LESS THAN 25% CONTRIBUTION

ITEM C = LESS THAN 0 - 5% CONTRIBUTION

ITEM	DEMAND	COST/UNIT	DOLLAR VALUE	DOLLAR %	CLASSIFICATION
1	1600	12	$19,200.00	(19200 / 334300) * 100 = 5.74	B
2	4900	21	$102,900.00	(102900 / 334300) * 100 = 30.78	A
3	900	3	$2,700.00	(2700 / 334300) * 100 = 0.81	C
4	700	8	$5,600.00	(5600 / 334300) * 100 = 1.68	C
5	800	2	$1,600.00	(1600 / 334300) * 100 = 0.48	C
6	4700	4	$18,800.00	(18800 / 334300) * 100 = 5.62	B
7	4600	29	$133,400.00	(133400 / 334300) * 100 = 39.9	A
8	500	10	$5,000.00	(5000 / 334300) * 100 = 1.5	C
9	1900	13	$24,700.00	(24700 / 334300) * 100 = 7.39	B
10	1200	17	$20,400.00	(20400 / 334300) * 100 = 6.1	B

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