Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items.Each of these items has a unique demand pattern and may require a different kind of inventory management system.The annual demand pattern and the unit cost of these items are given in the following table.Conduct an ABC inventory analysis and classify these items into A,B,and C type of inventories.Suggest suitable methods for managing these three distinct types of inventories:

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The ABC classification is done by determining the annual dollar usage and the percentage of total dollar usage as shown in the following table:
 11ea6f77_6ed5_fb68_b3b4_c32e1ce063e8_TB2610_00 Items 3 and 6 contribute the most (73.2%) of the total dollar value and should be classified as A items. They should be monitored continuously using a continuous review approach and should have tight control.
Items 2, 4, and 9 contribute 16.3% of the total dollar value and are classified as B items. They can be monitored by using a periodic review system and require moderate control, compared to A items.
The remaining items (1, 5, 7, 8, and 10) contribute the least (10.5%) and are classified as C items. They can be monitored using a periodic review system that has looser control, compared to A or B items.

Lincoln Machine Tool Company Maintains an Inventory Pool Consisting of 10