Question

Question 14 Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items. Each of these items has a unique demand pattern and may require a different kind of inventory management system. The annual demand pattern and the unit cost of these items are given in the following table. Classify the items in A, B, and C categories according to annual dollar usage. Item Type Annual Usage in thousands Unit Cost in Dollars Item 1 10 $2.50 Item 2 30 $1.25 Item 3 20 $16.00 Item 4 10 $0.75 Item 5 20 $3.00 Item 6 33 $2.50 Item 7 60 $14.25 Item 8 22 $10.00 Item 9 100 $2.75 Item 10 500 $4.25 Using the above data, Item 6 will be classified as: A. A item B. B item C. C item D. None of the above Reset Selection

Question 15 Using the data of Question 14, Item 7 will be classified as: A. A item B. B item C. C item D. None of the above Reset Selection

Question 16 Using the data of Question 14, Item 8 will be classified as: A. A item B. B item C. C item D. None of the above Reset Selection

Question 17 One end item A requires three component parts: B, C, and D. The bill of material indicates that for each completed A, 3 units of B, 2 units of C, and 1 unit of D are required. Current inventory for the four items is as follows: There are 18 As, 40 Bs, 50 Cs and 35 Ds in stock. If the lead time for all items is one week and there are no scheduled receipts for any item, how many units of product A can be delivered to customers at the start of next week (week 2)? A. 35 B. 31 C. 25 D. 13 E. None of the above

Answer 1

Please refer below table for reference:

Item type	Annual usage in thousand dollars	Unit cost in Dollars	Annual Value( Dollars)	Cumulative value ( Dollars)	Cumulative value as % of total value ( %)
10	500	4.25	2125	2125	53.03
7	60	14.25	855	2980	74.36
3	20	16	320	3300	82.35
9	100	2.75	275	3575	89.21
8	22	10	220	3795	94.70
6	33	2.5	82.5	3877.5	96.76
5	20	3	60	3937.5	98.25
2	30	1.25	37.5	3975	99.19
1	10	2.5	25	25	0.62
4	10	0.75	7.5	32.5	0.81
		Total value ($)	4007.5

Following are to be noted :

Annual value ( in dollars ) = Annual usage in thousand Dollars x Unit cost in Dollars

Items have been sorted in descending order of annual value ( Dollars )

Sum of all annual values = $4007.50

Cumulative value of any row ( after sorting in descending order ) = Sum of annual values from beginning upto that row

Cumulative value ( thus calculated) as % of total value = Cumulative value / 4007.50 x 100

We set following criteria for determination of A-B-C classification :

All items with cumulative value as % of total value upto around 80% as A class items

All items with cumulative value as % of total value> 80% and upto around 90% as B class items

All items with cumulative value as % of total value > 90 % and upto 100% as C class items

Based on above, following are the categorisation of items :

A class items : 10, 7, 3

B class items : 9

C class items : 8, 6, 5 , 2 , 1 , 4

ITEM 6 WILL BE CLASSIFIED AS :C ) C ITEM

ITEM 7 WILL BCLASSIFIED AS : A) A ITEM

ITEM 8 WILL BE CLASSIFIED AS : C) C ITEM

Number of item A which can be made from 40 Bs = 40 / 3= 13.33

Number of item A which can be made from 50Cs = 50/2 = 25

Number of item A which can be made from 35 Ds = 35/1 = 35

Out of above, least number is 13.33 ( or 13 rounded to nearest whole number )

Therefore , maximum number of item A which can be made from above combinations of B/C/D = 13

Number of As already in hand = 18 units

Therefore , number of units of product A which can be delivered to customer at the start of next week = 18 + 13 = 31 units

ANSWER :B ) 31