Question

A company has compiled the following data on the small set of products that comprise the specialty repair parts division.(component/Annual Demand/Unit Cost - A01/250/250, B02/75/90, C03/20/60,D04/150/150,E05/100/75). Which product do you suggest the to keep the tightest control over? Select one:

Answer 1

Answer: The component with the highest annual usage value is A01 with 62,500. Therefore, I suggest that the company keeps the tightest control over component A01 to ensure that it is always in stock and available to meet customer demand.

Explanation: To determine which product to keep the tightest control over, we need to calculate the annual usage value for each component, which is the product of annual demand and unit cost.

The annual usage value for each component is:

A01: 250 x 250 = 62,500

B02: 75 x 90 = 6,750

C03: 20 x 60 = 1,200

D04: 150 x 150 = 22,500

E05: 100 x 75 = 7,500

Based on these calculations, the component with the highest annual usage value is A01 with 62,500. Therefore, I suggest that the company keeps the tightest control over component A01 to ensure that it is always in stock and available to meet customer demand.