Question

Perform ABC analysis for the following products:

Item	Volume (units/ year)	Cost ($/unit)	Annual $ Volume
A	700	1	700
B	70	15	1050
C	965	4	3860
D	514	5	2570
E	20	15	300
F	770	32	24640
G	608	29	17632
H	513	2	1026
I	578	10	5780
J	199	2	398
			57956

please, try to explain how can get the answer without used excel

Answer 1

Total Annual $ Value = 57956

Total units/year = 4937

Let us now calculate the % contribution of each item to Annual Vaule (Annual Value of item/Total Annual Value)

A = 700/57956 = 1.21%

B = 1.81%

C = 6.66%

D = 4.43%

E = 0.52%

F = 42.52%

G = 30.42%

H = 1,77%

I = 9.97%

J = 0.69%

Similarty let us calculate unit contribution to total unites for each item

A = 14.18%

B = 1.42%

C = 19.55%

D = 10.41%

E = 0.41%

F = 15.60%

G = 12.32%

H = 10.39%

I = 11.71%

J = 4.03%

Item F and G contribute maximum towards total Annual $ Value

Total Units for F & G = 15.60% + 12.32% = 27.91%

Total Annual $ Revenue for F&G = 42.52% + 30.42% = 72.94%

Hence F & G can be classified under A category (so nearly 30% of units contribute to nearly 70% of revenue)

Let us now look at the next biggest items from Annual $ Revenue - C, D & I

C, D & I form 19.55% + 10.41% + 11.71% = 41.66% of total units

C, D & I contribute to 6.66% + 4.43% + 9.97% = 21.07% of total Annual $ Revenue

Hence, C, D & I can be classified in Category B (nearly 40% of the units contribute to 20% of the revenue)

Remaining - A, B, E, H, J contribute 30.42% towards the total number of units and 5.99% of the total Annual $ Revenue

Hence A, B, E, H, J can be classified in Category C