Question

DAT, Inc., is considering the use of ABC analysis to classify SKUs in three categories: those that will be delivered daily from their supplier (class A item), those that will be controlled using a continuous review system (class B items), and those that will be held in a two-bin system (class C items). DAT Inc. has asked you to determine the ABC classification.

The table below shows the data for 20 inventoried items.

SKU code	Projected Annual Demand	Unit Cost
1	1500	$   50.00
2	6450	$   20.00
3	5500	$   60.00
4	200	$   12.50
5	2000	$ 350.00
6	84	$ 250.00
7	800	$   80.00
8	300	$    5.00
9	10000	$   35.00
10	2000	$   65.00
11	5000	$   25.00
12	3250	$ 125.00
13	30000	$    1.50
14	2900	$   10.00
15	800	$   15.00
16	1400	$ 100.00
17	1470	$ 100.00
18	8200	$   15.00
19	12500	$    0.16
20	5000	$    0.20

Answer 1

SKU	Annual Demand	Unit cost	Volume	Usage	Classification
1	1500	50	75000	2.647137	B
2	6450	20	129000	4.553075	B
3	5500	60	330000	11.6474	A
4	200	12.5	2500	0.088238	C
5	2000	350	700000	24.70661	A
6	84	250	21000	0.741198	C
7	800	80	64000	2.25889	B
8	300	5	1500	0.052943	C
9	10000	35	350000	12.3533	A
10	2000	65	130000	4.58837	B
11	5000	25	125000	4.411894	B
12	3250	125	406250	14.33866	A
13	30000	1.5	45000	1.588282	B
14	2900	10	29000	1.02356	B
15	800	15	12000	0.423542	C
16	1400	100	140000	4.941322	B
17	1470	100	147000	5.188388	B
18	8200	15	123000	4.341304	B
19	12500	0.16	2000	0.07059	C
20	5000	0.2	1000	0.035295	C
			2833250