Question

Answered step-by-step
please help me with this question A manufacturing company uses the...

Image transcription text

A manufacturing company uses the following items annually for operations. Perform ABC
Classification of these items and interpret your results. ' Unit value measurement (units) 015.) 1
Copper wire/plate 3 Ceramic insulators 7 m_ 2 Steel plate pieces 11 Brass washers 2 Plastic
components pieces I.
Answer & Explanation
Solved by verified expert
Hope this helps :)
I created a step by step procedure for this, see attached images.
The completion of this calculations tends to check and review the data existed on the
manufacturing company you stated.
Based on this calculation, items that falls under category A represents the highest valuable
products on your company, might as well contribute to the overall of its profit. Category B is
much lesser critical than the first category (A), either this items has the potential to go upward to
Category A or falls down to Category C or sustain its place. The last category C, are the items
which are marginally valuable,
it may tend to help you continually run your company with a fixed and steady income, but
don't individually contribute as much value as to either the seller or to the company itself.

Step-by-step explanation

Image
transcription text

1 Calculate the annual consumption value for each item. Use the formula : Annual number units sold (per item) x
 tonnes 400 5000 2000000 3 Ceramic Insulators pieces 40,000 30 1200000 4 Brass Fasteners
pieces 60,000 1 60000 5 Steel Fasteners pieces 40,000 1.25 50000 6 Ceramic Bushes pieces
20,000 10 200000 7 Paint litre 400 200 80000 8 Electrical Cable metre 20,000 3 60000 9 Power
Sockets pieces 10,000 7 70000 10 Plugs pieces 10,000 8 80000 11 Brass Washers pieces 80,000
0.5 40000 12 Plastic Components pieces 60,000 1.25 75000

Image
transcription text

2 Arrange the items based on their Annual Consumption Value. Use: Descending Order Annual Unit Annual Sr.
Insulators pieces 40,000 30 1200000 4 Ceramic Bushes pieces 20,000 10 200000 5 Paint litre
400 200 80000 6 Plugs pieces 10,000 8 80000 7 Plastic Components pieces 60,000 1.25 75000 8
Power Sockets pieces 10,000 7 70000 9 Brass Fasteners pieces 60,000 1 60000 10 Electrical
Cable metre 20,000 3 60000 11 Steel Fasteners pieces 40,000 1.25 50000 12 Brass Washers
pieces 80,000 0.5 40000
 Image
transcription text

3 Total the number of Usage per items and the Annual Consumption Value. Annual Unit Sr. No.
Item Name Annual UOM Usage Value (units) Consumption Value (Rs. ) 1 Steel Plate tonnes
400 5000 2000000 2 Copper Wire/Plate tonnes 200 7000 1400000 3 Ceramic Insulators pieces
40,000 30 1200000 4 Ceramic Bushes pieces 20,000 10 200000 5 Paint litre 400 200 80000 6
Plugs pieces 10,000 8 80000 7 Plastic Components pieces 60,000 1.25 75000 8 Power Sockets
pieces 10,000 7 70000 9 Brass Fasteners pieces 60,000 1 60000 10 Electrical Cable metre
20,000 3 60000 11 Steel Fasteners pieces 40,000 1.25 50000 12 Brass Washers pieces 80,000
0.5 40000 TOTAL 341000 5315000
Image transcription text

4 Calculate the Cumulative Percentage of Usage Units and Cumulative Percentage of the
Annual Consumption Values using the totals. Use the formula : Annual Usage (units) / Total
amount of Annual Usage = Cumulative Percentage of Annual Usage (Annual Consumption
Value (per item) / Total Annual Consumption Value) x 100 = Cumulative Percentage of the
Annual Consumption Values Annual Unit Annual % of Annual % of Annual Sr. No. Item Name
UOM Usage Value Consumption Value Usage Consumption Value (units) (RS.) Steel Plate
tonnes 400 5000 2000000 0.0012 37.63 2 Copper Wire/Plate tonnes 200 7000 1400000
0.0006
26.34 3 Ceramic Insulators pieces 40,000 30 1200000 0.1173 22.58 4 Ceramic Bushes pieces
20,000 10 200000 0.0587 3.76 5 Paint litre 400 200 80000 0.0012 1.51 6 Plugs pieces 10,000 8
30000 0.0293 1.51 7 Plastic Components pieces 60,000 1.25 75000 0.1760 1.41 8 Power Sockets
pieces 10,000 7 70000 0.0293 1.32 9 Brass Fasteners pieces 60,000 1 60000 0.1760 1.13 10
Electrical Cable metre 20,000 3 60000 0.0587 1.13 11 Steel Fasteners pieces 40,000 1.25 50000
0.1173 0.94 12 Brass Washers pieces 80,000 0.5 40000 0.2346 0.75 TOTAL 341000 5315000
Image transcription text

5 Identify the thresholds for splitting your data into A, B and C categories. This is usually unique
in every company with the combination of their product, but typically it is closer to 80%, 15%
& 5%. Annual Unit Annual % of Annual % of Annual Sr. No. Item Name UOM Usage
Value Consumption Value Usage Consumption Value (units) (RS.) Steel Plate tonnes 400 5000
2000000 0.0012 37.63 2 Copper Wire/Plate tonnes 200 7000 1400000 0.0006 26.34 Category A
- 86.55% 3 Ceramic Insulators pieces 40,000 30 1200000 0.1173 22.58 4 Ceramic Bushes pieces
20,000 10 200000 0.0587 3.76 5 Paint litre 400 200 80000 0.0012 1.51 6 Plugs pieces 10,000 8
80000 0.0293 1.51 Category B - 11.76% 7 Plastic Components pieces 60,000 1.25 75000 0.1760
1.41 8 Power Sockets pieces 10,000 7 70000 0.0293 1.32 9 Brass Fasteners pieces 60,000 1
60000 0.1760 1.13 10 Electrical Cable metre 20,000 3 60000 0.0587 1.13 11 Steel Fasteners
pieces 40,000 1.25 50000 0.1173 0.94 12 Brass Washers pieces 80,000 0.5 40000 0.2346 0.75
Category C - 1.69% TOTAL 341000 5315000