a. Classify each item in inventory using an ABC plan.Item NumberClass246.78.91011121314151617181920 In the past, Taylor Industries has used a fixed-time period inventory system that involved taking a complete inventory count of all itemseach month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of laborinvolved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor'sitems.ITEMANNUALITEMANNUALNUMBERUSAGENUMBERUSAGE$ 13,9002,00012,9002,80052,20010,4001,3002,60011,9005,80011121,10043,90010,7001,70011,0004,60063,6004,1003,5003134141516717189.191016,00020

Here the data is given Item number Annual income 1 2,000 2 12,900 3 2,800 4 52,200 5 10,400 6 1,300 7 2,600 8 11,900 9 5,800 10 16,000 11 13,900 12 1,100 13 43,900 14 10,700 15 1,700 16 11,000 17 4,600 18 63,600 19 4,100 20 3,500 total 2,76,000we can re-right this in descending order and then calculate the percentage by cost and cumulative percentage by cost (percentage by cost = cost / total cost) (cumulative percentage = sum of costs till the consecutive term / total cost ) Item number Annual income percentage by cost cumulative percentage by cost 18 63600 23.04% 23.04% 4 52200 18.91% 41.96% 13 43900 15.9% 57.86% 10 16000 5.79% 63.66% 11 13900 5.03% 68.69% 2 12900 4.67% 73.37% 8 11900 4.31% 77.68% 16 11000 3.98% 81.67% 14 10700 3.87% 85.54% 5 10400 3.76% 89.31% 9 5800 2.10% 91.41% 17 4600 1.66% 93.07% 19 4100 1.48% 94.57% 20 3500 1.26% 95.83% 3 2800 1.01% 96.85% 7 2600 0.94% 97.79% 1 2000 0.72% 98.51% 15 1700 0.61% 99.13% 6 1300 0.47% 99.60% 12 1100 0.39% 100% according to ABC classification summary table cumulative % category 0%-71% A 71%-91% B >91% C Item number Annual income percentage by cost cumulative percentage by cost category 1 2000 0.72% 98.51% C 2 12900 4.67% 73.37% B 3 2800 1.01% 96.85% C 4 52200 18.91% 41.96% A 5 10400 3.76% 89.31% B 6 1300 0.47% 99.60% C 7 2600 0.94% 97.79% C 8 11900 4.31% 77.68% B 9 5800 2.10% 91.41% C 10 16000 5.79% 63.66% A 11 13900 5.03% 68.69% A 12 1100 0.39% 100% C 13 43900 15.9% 57.86% A 14 10700 3.87% 85.54% B 15 1700 0.61% 99.13% C 16 11000 3.98% 81.67% B 17 4600 1.66% 93.07% C 18 63600 23.04% 23.04% A 19 4100 1.48% 94.57% C 20 3500 1.26% 95.83% C hence our answer is Item number class 1 C 2 B 3 C 4 A 5 B 6 C 7 C 8 B 9 C 10 A 11 A 12 C 13 A 14 B 15 C 16 B 17 C 18 A 19 C 20 C