Question

In the past, Taylor Industries has used a fixed?time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items.

ITEM NUMBER	ANNUAL USAGE		ITEM NUMBER	ANNUAL USAGE
1	$	2,500	11	$	27,000
2		33,000	12		23,000
3		34,000	13		3,700
4		97,000	14		29,000
5		1,100	15		2,600
6		100,000	16		3,600
7		800	17		29,500
8		33,500	18		22,000
9		900	19		2,700
10		98,000	20		1,800

a. What would you recommend Taylor do to cut back its labor cost? (Illustrate using an ABC plan.)

Item Number	Class
1	(Click to select)BAC
2	(Click to select)ACB
3	(Click to select)BCA
4	(Click to select)CAB
5	(Click to select)CAB
6	(Click to select)BCA
7	(Click to select)ABC
8	(Click to select)BCA
9	(Click to select)BCA
10	(Click to select)ABC
11	(Click to select)CAB
12	(Click to select)CBA
13	(Click to select)ACB
14	(Click to select)ABC
15	(Click to select)CBA
16	(Click to select)CBA
17	(Click to select)ABC
18	(Click to select)ABC
19	(Click to select)ABC
20	(Click to select)ABC

Answer 1