In F2:F9, calculate each item's revenue for the year (the sum of the four quarters). The total in F10 calculates itself.
Lesson theory
ABC analysis splits items by their contribution to revenue (the Pareto principle: a small share of items brings in most of the money):
- calculate each item's revenue and sort in descending order (already done in our table);
- calculate each item's share of total revenue:
=F2/$F$10; - calculate the cumulative share: this item's share plus the shares of all items above it;
- assign a class: cumulative share up to 80% is A, up to 95% is B, the rest is C.
XYZ analysis rates how stable demand is, using the coefficient of variation:
=STDEV.S(B2:E2)/AVERAGE(B2:E2), the spread of quarterly sales relative to the average.
Up to 10% is X (stable demand), up to 25% is Y (fluctuating, seasonal), above that is Z (unpredictable).
The 80/95 and 10/25 thresholds are common but not the only valid ones. That is why they sit in cells B12:B15, and the IF formulas refer to them instead of containing numbers.
Test yourself
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