Question

In: Operations Management

Over which product do you suggest the firm keep the tightest control?

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which product do you suggest the firm keep the tightest control?

$$ \begin{array}{|c|c|c|} \hline \text { SKU } & \text { Annual Demand } & \text { Unit cost } \\ \hline \text { R11 } & 125 & \$ 25 \\ \hline \text { S22 } & 55 & \$ 90 \\ \hline \text { T33 } & 100 & \$ 500 \\ \hline \text { U44 } & 150 & \$ 550 \\ \hline \text { V55 } & 2000 & \$ 4 \\ \hline \end{array} $$

  • S22
  • R11
  • U44
  • V55
  • T33

Solutions

Expert Solution

BECAUSE IT HAS THE HIGHEST DOLLAR %

ITEM

DEMAND

COST/UNIT

DOLLAR VALUE

DOLLAR %

CLASSIFICATION

R11

125

25

3125

2.1

C

S22

55

90

4950

3.33

C

T33

100

500

50000

33.65

A

U44

150

550

82500

55.53

A

V55

2000

4

8000

5.38

B

           
     

148575

100

 

The answer is C. U44

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