Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Which products do you suggest the firm keep the tightest control over? Explain
SKU Annual Demand Unit Cost
R11 250 $250
S22 75 $90
T33 20 $60
U44 150 $150
V55 100 $75
R11 and U44 represent over 80% of the firm's volume in this area. R11 is classified A, U44 is classified B, and all others are C. The tightest controls go to R11, then U44 because of their high percentage of sales volume.
Volume Unit cost Dollar volume % Dollar volume Cumulative $-vol % Class
R11 250 $250 $62,500 62.22% 62.22% A
U44 150 $150 $22,500 22.40% 84.62% B
V55 100 $75 $7,500 7.47% 92.09% C
S22 75 $90 $6,750 6.72% 98.81% C
T33 20 $60 $1,200 1.19% 100.00% C
Total $100,450
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