Booker’s Book Bindery Inventory Analysis

Booker’s Book Bindery (BBB) divides inventory items into three classes according to their dollar usage. The scheme they use to classify inventory is given in Table 1.

Table 1

|Class |Approximate |Approximate |
| |percent of items |percent dollar |
| | |usage |
|A |20% |80% |
|B |30% |15% |
|C |50% |5% |

A list of the inventory items and usage information is given in Table 2.

Table 2

|Part Number |Description |Quantity used|Unit value ($) |
| | |per year | |
|1 |Boxes |500 | $ 3.00 |
|2 |Cardboard (square feet) |18,000 | $ 0.02 |
|3 |Cover stock |10,000 | $ 0.75 |
|4 |Glue (gallons) |75 | $ 40.00 |
|5 |Inside covers |20,000 | $ 0.05 |
|6 |Reinforcing tape (meters) |3,000 | $ 0.15 |
|7 |Signatures |150,000 | $ 0.45 |

Task 1: Using Excel OM, perform an ABC analysis for BBB and propose a classification of the 7 inventory items.

The last EOQ analysis that was performed on Signatures used a setup cost of $10 and a holding cost of 15%. There is a 5-day lead time for this part. It’s been a year since the last EOQ analysis was performed on Signatures. The inventory manager has determined that the setup cost has increased to $20.
Task 2: How