In the past, Taylor Industries has used a fixed–time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 30 of Taylor’s items.
|
Item |
Usage |
Unit cost |
Item |
Usage |
Unit cost |
|
1 |
36 |
350 |
16 |
60 |
610 |
|
2 |
510 |
30 |
17 |
120 |
20 |
|
3 |
50 |
23 |
18 |
270 |
15 |
|
4 |
300 |
45 |
19 |
45 |
50 |
|
5 |
18 |
1900 |
20 |
19 |
3200 |
|
6 |
500 |
8 |
21 |
910 |
3 |
|
7 |
710 |
4 |
22 |
12 |
4750 |
|
8 |
80 |
26 |
23 |
30 |
2710 |
|
9 |
344 |
28 |
24 |
24 |
1800 |
|
10 |
67 |
440 |
25 |
870 |
105 |
|
11 |
510 |
2 |
26 |
244 |
30 |
|
12 |
682 |
35 |
27 |
750 |
15 |
|
13 |
95 |
50 |
28 |
45 |
110 |
|
14 |
10 |
3 |
29 |
46 |
160 |
|
15 |
820 |
1 |
30 |
165 |
25 |
A. What would you recommend Taylor do to cut back its labor cost? (Illustrate using an ABC plan.) (10 MARKS)
B. Can you suggest a system for allocating control time? (10 MARKS)
C. Item 27 is critical to continued operations. How would you recommend it be classified? (6 MARKS)
D. Taylor offers an innovative product to their customers. The good reputation of Taylor’s products is depending on technology used in the product. In order to protect the company’s competitive advantage, Taylor had limited the number of supplier for class A items. Discuss how Taylor would deals with probability of shortage of class A items, if they are only one supplier of each item. (14 MARKS)
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