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. her is a randome sample of 20 of Taylors Items.

Item Number     Annual Usage     Item Number     Annua Usage

1                          $1500                  11                      $13,000

2                          12,000                  12                          600

3                          2,200                     13                     42,000

4                          50,000                 14                      9,900

5                           9,600                   15                     1,200

6                            790                     16                   10,200

7                            2,000                  17                    4,000

8                           11,000                 18                   61,000

9                            800                      19                   3,500

10                          15,000                 20                   2,900

a. What would you recomment Taylor do to cut back its labor cost? (Illustrate using an ABC plan.).

b. Item 15 is critical to continued operations. How would you recommend it be classified?