Question

Question 2 [20 Marks]

You are provided with the following information. Conduct an ABC analysis, categorising each item of stock appropriately. (80% = A, 15% = B, 5%=C

Item no.	Unit cost (R)	Annual Demand
101	5	48 000
102	11	2000
103	15	300
104	8	800
105	7	4800
106	16	1200
107	70	18000
108	4	300
109	9	5000
110	12	500

Answer 1

Item	Cost	demand	Cost x demand (consumption value		Ranking
101	5	48000	240000		2
102	11	2000	22000		5
103	15	300	4500		9
104	8	800	6400		7
105	7	4800	33600		4
106	16	1200	19200		6
107	70	18000	1260000		1
108	4	300	1200		10
109	9	5000	45000		3
110	12	500	6000		8

Arranging in ascending order as per consumption

Item	Cost	Demand	consumption	%consumption	%goods sold
107	70	18000	1260000	74.65*	44.56**	A
101	5	48000	290000	17.18	3.18	B
109	9	5000	45000	2.67	5.73	C
105	7	4800	33600	1.99	4.46	C
102	11	2000	22000	1.30	7	C
106	16	1200	19200	1.14	10.19	C
104	8	800	6400	0.38	5.09	C
110	12	500	6000	0.35	7.65	C
103	15	300	4500	0.27	9.55	C
108	4	300	1200	0.07	2.55	C
Total	157		1687900

* 1260000/1687900 x 100

** 70/157 x 100

Looking at the table above item 107 should be in category A with 74,65% share

Item 101 would be in B category with 17.18% share

And rest of the items in C category