The following table provides a random sample of the unit values and annual demands of eight SKUs. SKU Code Unit Value Demand (units) A104 $0.02 D205 $2.60 X104 $4.80 U404 $2.50 L205 $0.36 S104 $0.84 X205 $4.35 L104 $0.23 4,500 30 25 2,500 1,040 380 70 250 Southern Markets Inc. is considering the use of ABC analysis to focus on the most critical SKUs in its inventory. a. Based on the percentage of dollar usage, which class should L205 belong to? Class b. Based on the percentage of dollar usage, which class should L104 belong to? Class
The following table provides a random sample of the unit values and annual demands of eight SKUs. SKU Code Unit Value Demand (units) A104 $0.02 D205 $2.60 X104 $4.80 U404 $2.50 L205 $0.36 S104 $0.84 X205 $4.35 L104 $0.23 4,500 30 25 2,500 1,040 380 70 250 Southern Markets Inc. is considering the use of ABC analysis to focus on the most critical SKUs in its inventory. a. Based on the percentage of dollar usage, which class should L205 belong to? Class b. Based on the percentage of dollar usage, which class should L104 belong to? Class
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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![The following table provides a random sample of the unit values and annual demands of eight SKUs.
| SKU Code | Unit Value | Demand (units) |
|----------|------------|----------------|
| A104 | $0.02 | 4,500 |
| D205 | $2.60 | 30 |
| X104 | $4.80 | 25 |
| U404 | $2.50 | 2,500 |
| L205 | $0.36 | 1,040 |
| S104 | $0.84 | 380 |
| X205 | $4.35 | 70 |
| L104 | $0.23 | 250 |
Southern Markets Inc. is considering the use of ABC analysis to focus on the most critical SKUs in its inventory.
**a. Based on the percentage of dollar usage, which class should L205 belong to?**
\[ \text{Class} \: \_\_\_\_\_\]
**b. Based on the percentage of dollar usage, which class should L104 belong to?**
\[ \text{Class} \: \_\_\_\_\_\]
### Explanation
ABC analysis is an inventory categorization technique frequently used in materials management. It divides items into three categories (A, B, and C) based on their importance:
- **Class A:** The top 20% of items that account for 70-80% of the consumption value. These are the most valuable items.
- **Class B:** The next 30% of items that account for 15-25% of the consumption value.
- **Class C:** The last 50% of items that account for 5-10% of the consumption value. These are the least valuable items.
**Calculations:**
1. **Determine the total dollar value for each SKU:**
- **A104:** $0.02 * 4,500
- **D205:** $2.60 * 30
- **X104:** $4.80 * 25
- **U404:** $2.50 * 2,500
- **L205:** $0.36 * 1,040
- **S104:** $0.84 * 380
- **X205:** $4.35](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd9336e41-878d-447f-8d98-1ef6dee3d14b%2Fab2bc314-ac06-458c-849d-de8fe5d42c8f%2Fa2pzmtg.jpeg&w=3840&q=75)
Transcribed Image Text:The following table provides a random sample of the unit values and annual demands of eight SKUs.
| SKU Code | Unit Value | Demand (units) |
|----------|------------|----------------|
| A104 | $0.02 | 4,500 |
| D205 | $2.60 | 30 |
| X104 | $4.80 | 25 |
| U404 | $2.50 | 2,500 |
| L205 | $0.36 | 1,040 |
| S104 | $0.84 | 380 |
| X205 | $4.35 | 70 |
| L104 | $0.23 | 250 |
Southern Markets Inc. is considering the use of ABC analysis to focus on the most critical SKUs in its inventory.
**a. Based on the percentage of dollar usage, which class should L205 belong to?**
\[ \text{Class} \: \_\_\_\_\_\]
**b. Based on the percentage of dollar usage, which class should L104 belong to?**
\[ \text{Class} \: \_\_\_\_\_\]
### Explanation
ABC analysis is an inventory categorization technique frequently used in materials management. It divides items into three categories (A, B, and C) based on their importance:
- **Class A:** The top 20% of items that account for 70-80% of the consumption value. These are the most valuable items.
- **Class B:** The next 30% of items that account for 15-25% of the consumption value.
- **Class C:** The last 50% of items that account for 5-10% of the consumption value. These are the least valuable items.
**Calculations:**
1. **Determine the total dollar value for each SKU:**
- **A104:** $0.02 * 4,500
- **D205:** $2.60 * 30
- **X104:** $4.80 * 25
- **U404:** $2.50 * 2,500
- **L205:** $0.36 * 1,040
- **S104:** $0.84 * 380
- **X205:** $4.35
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