Carry out ABC analysis for the following data extracted from the records of
a Pvt. Ltd. Company. Classify the items into A, B and C categories where A
category items can be assumed upto 75%, B category items upto 20% and C
category items upto 5% of annual usage value..
Unit Cost Annual
Item Codes
(Rs.) Consumption (Rs.)
A101 12 1200
A102 41 2350
A103 23 1120
A104 3 320
A105 22 189
A106 48 2010
A107 103 900
A108 62 6200
A109 39 1300
A110 55 1800
A111 3 23000
A112 18 1100
A113 117 540
A114 81 356
A115 8 1100
Unit Cost Annual Annual usage
Item Codes
(Rs.) Consumption (Rs.) value (Rs.)
A101 12 1200 14400
A102 41 2350 96350
A103 23 1120 25760
A104 3 320 960
A105 22 189 4158
A106 48 2010 96480
A107 103 900 92700
A108 62 6200 384400
A109 39 1300 50700
A110 55 1800 99000
A111 3 23000 69000
A112 18 1100 19800
A113 117 540 63180
A114 81 356 28836
A115 8 1100 8800
Then arranging materials in descending order of annual
usage value as follows.
Cum. %
Annual %
Unit Annual of
Item usage Annual Classf
Cost Consumptio Annual
Codes value usage n
(Rs.) n usage
(Rs.) value
value
A108 62 6200 384400 36.45 36.45 A
A110 55 1800 99000 9.39 45.84 A
A106 48 2010 96480 9.15 54.99 A
A102 41 2350 96350 9.14 64.12 A
A107 103 900 92700 8.79 72.91 A
A111 3 23000 69000 6.54 79.46 B
A113 117 540 63180 5.99 85.45 B
A109 39 1300 50700 4.81 90.26 B
A114 81 356 28836 2.73 92.99 B
A103 23 1120 25760 2.44 95.43 B
A112 18 1100 19800 1.88 97.31 C
A101 12 1200 14400 1.37 98.68 C
A115 8 1100 8800 0.83 99.51 C
A105 22 189 4158 0.39 99.91 C
A104 3 320 960 0.09 100.00 C
Total Cost of Materials 1054524 100.00
A Category Items: A108, A110, A106, A102 & A107
B Category Items: A111, A113, A109, A114 & A103
C Category Items: A112, A101, A115, A105 & A104
Decision:
1) Material numbers A108, A110, A106, A102 & A107 are contributing to
75% of the total material cost of the company, they are classified as “A-
Class of items”, hence these items must be controlled by top
management, as they are costlier & unavailability of such items may
affects organization to a greater extent.
2) Material numbers A111, A113, A109, A114 & A103 are contributing to
20% of the total material cost of the company, they are classified as “B-
Class of items”, hence these items must be controlled by middle
management, as they are medium costlier & unavailability of such items
may affects organization to a good extent.
3) Material numbers A112, A101, A115, A105 & A104 are contributing to
5% of the total material cost of the company, they are classified as “C-
Class of items”, hence these items can be controlled by lower
management, though they are cheaper, unavailability of such items may
affects organization to some extent.