Harry’s Sheds has ten different items in its finished goods inventory.

Harry’s Sheds has ten different items in its finished goods inventory. The average number of units held in inventory and the average unit cost are listed for each item. The firm uses an ABC system of inventory control.

(a) Which items should be considered to be in the A category of an ABC system of inventory?
(b) Which items should be considered to be in the B category of an ABC system of inventory?

ANSWER

(a) Items 3, 5, and 9 should be considered in the A category.
(b) Item 10 clearly belongs to the C category. All the rest of the inventory items have about an equal investment and most likely belong in the B category.