Question

Q1. Jaun Camilo is hired to monitor the inventory of Angela Inc., which assembles microcomputers for the local market. His first job is to identify the components which have the maximum impact on Angela Inc's profitability and receives the following list of goods with their annual demand and unit cost. Unit Cost($) Annual Demand (units) Product Name 300 25000 Microprocessor 90 25000 Motherboard Cooling Fan Auxiliary Cards 30 30000 40000 10 25000 40 Case Based on the ABC classification discussed in class present the items that need: a) Precise/constant monitoring b) Normal monitoring c) Periodical Monitoring Justify your answer with calculations 58

Answer 1

Product Name	Unit Cost	Annual Demand (units)	Percentage	Total Cost	Percentage	Monitoring
Microprocessor	$        300	25,000	17%	$    7,500,000	62%	Precise/constant monitoring
Motherboard	$          90	25,000	17%	$    2,250,000	19%	Normal Monitoring
Cooling Fan	$          30	30,000	21%	$        900,000	7%	Periodical Monitoring
Auxiliary Cards	$          10	40,000	28%	$        400,000	3%	Periodical Monitoring
Case	$          40	25,000	17%	$    1,000,000	8%	Periodical Monitoring
		145,000		$ 12,050,000

As can clearly be seen Microprocessor alone represents over 60% of the total costs. It is the most important item cost wise. A constant monitoring over microprocessor is required.

Next is motherboard with close to 19% share of total costs. Normal monitoring is necessary for it.

For the remaining that represent 18% of the total costs combined, periodical monitoring would do the job since they fall in the C category.