# solution

ABC INVENTORY ANALYSIS ASSIGNMENT

House & Home (H&H) is a retailer of furniture, housewares, and decorative items. The company operates in the southeastern U.S. H&H was founded by Auburn graduate (Class of 1981) Dusty Smith in 1985 and has enjoyed consistent growth throughout its history. During a recent review of company finances, Dusty determined that the company was holding too much inventory.

Dusty has hired you as a consultant to help distinguish the top sellers from the â€œdogsâ€. To that end, Dusty has provided you a random sample of 200 SKUs and their sales over the past 12 months. Dusty wants to be able to closely monitor his â€œstrategic sellersâ€ which constitute the 20% of items with the greatest sales (the A items). He wants to provide only minimal inventory management of the lowest selling 30% of items (the C items). He believes the remaining B items require a bit more attention than the C items.

Your assignment is to develop an ABC Analysis spreadsheet using the template provided to you. We are going to assume that the profit margin on each item is the same, which will allow us to use COGS/year in descending order per SKU to rank the items. The A items will be those that make up the top 20% of this list, the B items will be the next 50%, and the C items will be the bottom 30%. Here are some key questions that you will need to answer after building the spreadsheet:

1. How many A items do you have?
2. What is the cumulative % of COGS for all the A items?
3. How many B items are there?
4. What is the cumulative % of COGS for all A and B items combined?
5. How many C items are there?
6. How would you propose to manage the inventories differently for the A vs. C classes?