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Chapter 12

Q. 12.EX.2

CYCLE COUNTING AT COLE’S TRUCKS, INC.. Cole’s Trucks, Inc., a builder of high-quality refuse trucks, has about 5,000 items in its inventory. It wants to determine how many items to cycle count each day.
APPROACH \blacktriangleright After hiring Matt Clark, a bright young OM student, for the summer, the firm determined that it has 500 A items, 1,750 B items, and 2,750 C items. Company policy is to count all A items every month (every 20 working days), all B items every quarter (every 60 working days), and all C items every 6 months (every 120 working days). The firm then allocates some items to be counted each day.

Step-by-Step

Verified Solution

SOLUTION \blacktriangleright

ITEM
CLASS
QUANTITY CYCLE-COUNTING POLICY NUMBER OF ITEMS
COUNTED PER DAY
A 500 Each month (20 working days) 500/20 = 25/day
B 1,750 Each quarter (60 working days) 1,750/60 = 29/day
C 2,750 Every 6 months (120 working days) 2,750/120 = 23/day
77/day

Each day, 77 items are counted.

INSIGHT \blacktriangleright This daily audit of 77 items is much more efficient and accurate than conducting a massive inventory count once a year.
LEARNING EXERCISE \blacktriangleright Cole’s reclassifies some B and C items so there are now 1,500 B items and 3,000 C items. How does this change the cycle count? [Answer: B and C both change to 25 items each per day, for a total of 75 items per day.]
RELATED PROBLEM \blacktriangleright 12.4