Problem 20-40 (Algo)

In the past, Taylor Industries has used a fixedtime period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items.

ITEM NUMBER	ANNUAL USAGE		ITEM NUMBER	ANNUAL USAGE
1	$	1,500	11	$	13,100
2		12,000	12		600
3		2,200	13		42,100
4		50,100	14		10,000
5		10,100	15		1,200
6		800	16		10,200
7		2,000	17		4,000
8		11,000	18		61,100
9		5,000	19		3,500
10		15,100	20		2,900

a. Classify each item in inventory using an ABC plan.

\begin{tabular}{|r|c|} \hline Item Number & Class \\ \hline 1 & \\ \hline 2 & \\ \hline 4 & A \\ \hline 6 & B \\ \hline 7 & C \\ \hline 8 & \\ \hline 9 & \\ \hline 10 & \\ \hline 11 & \\ \hline 12 & \\ \hline 13 & \\ \hline 14 & \\ \hline 15 & \\ \hline 16 & \\ \hline 17 & \\ \hline 18 & \\ \hline 19 & \\ \hline 20 \\ \hline \end{tabular}