Question

A small toy store has organized its 10 inventory items on an annual dollar-volume basis. The information below shows the items, their annual demands, and unit costs. How should the store classify these items into groups A, B, and C?

Item Number Annual Volume (Units) Unit Cost ($)
Item 1 300 $10
Item 2 1000 $30
Item 3 500 $60
Item 4 100 $2
Item 5 1500 $20
Item 6 600 $50
Item 7 2000 $1.50
Item 8 900 $70
Item 9 1200 $2.00
Item 10 700 $40

Answer 1

Classification:

Groups Annual Dollar-Volume

A Above $30,000:

Item Annual Volume Unit Cost Total Cost

Item 8 900 $70 $63,000

B Above $3,000:

Item Annual Volume Unit Cost Total Cost

Item 2 1,000 $30 $30,000

Item 3 500 $60 $30,000

Item 5 1,500 $20 $30,000

Item 6 600 $50 $30,000

Item 10 700 $40 $28,000

C $3,000 and Below

Item Annual Volume Unit Cost Total Cost

Item 1 300 $10 $3,000

Item 4 100 $2 $200

Item 7 2,000 $1.50 $3,000

Item 9 1,200 $2.00 $2,400

Step-by-step explanation:

a) Data and Calculations:

Item Annual Volume Unit Cost Total Cost

Number (Units) ($) ($)

Item 1 300 $10 $3,000

Item 2 1,000 $30 $30,000

Item 3 500 $60 $30,000

Item 4 100 $2 $200

Item 5 1,500 $20 $30,000

Item 6 600 $50 $30,000

Item 7 2,000 $1.50 $3,000

Item 8 900 $70 $63,000

Item 9 1,200 $2.00 $2,400

Item 10 700 $40 $28,000