Question
Read the case study below and answer the following questions. MAQ Corporation MAQ Corporation, a major producer of consumer electronics equipment, is currently faced with
Read the case study below and answer the following questions.
MAQ Corporation
MAQ Corporation, a major producer of consumer electronics equipment, is currently faced with a rapidly growing product line and its associated inventory problems. MAQs president, Mary Semerod, has decided to initiate a program to analyze the companys inventory requirements utilizing different inventory techniques. The first phase of this program consists of an ABC analysis of the companys product line (shown in the following table). Ms. Semerod has encountered difficulties in deciding on the appropriate criteria to use in the classification and in developing appropriate cutoff levels for each class of inventory. To solve her dilemma, Ms. Semerod has contracted the services of a logistics consulting firm to perform the inventory analysis.
SALES DATA (ONE-YEAR PERIOD)
PRODUCT | #UNITS SOLD | PRICE PER UNIT | PROFIT PER UNIT |
SR101 | 15,000 | $250 | $50.50 |
SR103 | 750 | $1,500 | $330.00 |
SR105 | 1,600 | $600 | $90.00 |
SR201 | 45 | $2,250 | $877.50 |
SR203 | 10 | $3,500 | $1,750.00 |
SR205 | 9,250 | $500 | $125.00 |
SR301 | 700 | $650 | $195.00 |
SR303 | 550 | $700 | $196.00 |
SR305 | 3,000 | $920 | $303.60 |
SR500 | 100 | $1,100 | $440.00 |
Questions
- Perform three separate ABC Classification Analyses using the following criteria: total volume sold for the year, total revenue for the year, and total profit for the year. Classify the inventory separately using each criterion. For example, you will classify products as A, B, or C based on total volume sold. That is one analysis. You will classify products as A, B, or C based on total revenue. That is the second analysis. You will classify products as A, B, or C based on total profit. That is the third analysis.
- How are the analyses similar? How are they different? Are any products classified as "A" for all three analyses? Which products?
- Which criterion would you recommend that MAQ Corporation use to classify their inventory? Why?
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