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Your company management wants you to compare the list of materials for HML and ABC analysis. For ABC classification they set the following criteria; Items below SR 100000 annual consumption shall be considered as C-items, items between SR 100000 and SR 150000 shall be considered as B-items, and items above SR 150000 shall be considered as A- items For HML classification they set the following criteria; Items below unit price SR 50 shall be considered as L-items, items between SR 50 and SR 100 unit price shall be considered as M-items, and items above SR 100 unit price shall be considered as H-items. Based upon your analysis suggest which classification shall be better for the company so that inventory can be optimized. Justify your answer. Consumption Price/unit (Units) Annual Consumption (SR) Annual Item H/M/L A/B/C SR A 2000 40 В 3000 65 C 2500 90 2400 100 E 2300 85 F 2600 110 G 2700 35 2300 105 I 2200 130 J 2500 45

Your company management wants you to compare the list of materials for HML and ABC analysis. For ABC classification they set the following criteria; Items below SR 100000 annual consumption shall be considered as C-items, items between SR 100000 and SR 150000 shall be considered as B-items, and items above SR 150000 shall be considered as A- items For HML classification they set the following criteria; Items below unit price SR 50 shall be considered as L-items, items between SR 50 and SR 100 unit price shall be considered as M-items, and items above SR 100 unit price shall be considered as H-items. Based upon your analysis suggest which classification shall be better for the company so that inventory can be optimized. Justify your answer. Consumption Price/unit (Units) Annual Consumption (SR) Annual Item H/M/L A/B/C SR A 2000 40 В 3000 65 C 2500 90 2400 100 E 2300 85 F 2600 110 G 2700 35 2300 105 I 2200 130 J 2500 45

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
Section: Chapter Questions
Problem 14E: Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving...
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Your company management wants you to compare the list of materials for HML and ABC analysis. For ABC classification they set the following criteria; Items below SR 100000 annual consumption shall be considered as C-items, items between SR 100000 and SR 150000 shall be considered as B-items, and items above SR 150000 shall be considered as A- items For HML classification they set the following criteria; Items below unit price SR 50 shall be considered as L-items, items between SR 50 and SR 100 unit price shall be considered as M-items, and items above SR 100 unit price shall be considered as H-items. Based upon your analysis suggest which classification shall be better for the company so that inventory can be optimized. Justify your answer. Consumption (Units) Annual Price/unit SR Consumption (SR) Annual Item H/M/L A/B/C A 2000 40 В 3000 65 C 2500 90 D 2400 100 E 2300 85 F 2600 110 G 2700 35 H 2300 105 I 2200 130 J 2500 45
Transcribed Image Text:Your company management wants you to compare the list of materials for HML and ABC analysis. For ABC classification they set the following criteria; Items below SR 100000 annual consumption shall be considered as C-items, items between SR 100000 and SR 150000 shall be considered as B-items, and items above SR 150000 shall be considered as A- items For HML classification they set the following criteria; Items below unit price SR 50 shall be considered as L-items, items between SR 50 and SR 100 unit price shall be considered as M-items, and items above SR 100 unit price shall be considered as H-items. Based upon your analysis suggest which classification shall be better for the company so that inventory can be optimized. Justify your answer. Consumption (Units) Annual Price/unit SR Consumption (SR) Annual Item H/M/L A/B/C A 2000 40 В 3000 65 C 2500 90 D 2400 100 E 2300 85 F 2600 110 G 2700 35 H 2300 105 I 2200 130 J 2500 45
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