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Question
Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items. Each of these items has a unique demand pattern and may require a different kind of inventory management system. The annual demand pattern and the unit cost of these items are given in the following table. Conduct an ABC inventory analysis and classify these items into A, B, and C type of inventories. Suggest suitable methods for managing these three distinct types of inventories:
| Item | Unit Cost | Annual Usage (in units) |
| 1 | $1.50 | 5,000 |
| 2 | $8.00 | 1,500 |
| 3 | $10.50 | 10,000 |
| 4 | $2.00 | 6,000 |
| 5 | $0.50 | 7,500 |
| 6 | $13.60 | 6,000 |
| 7 | $0.75 | 5,000 |
| 8 | $1.25 | 4,500 |
| 9 | $2.50 | 7,000 |
| 10 | $2.00 | 3,000 |
Answer
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