COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Inventory levels are maintained
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Inventory is classified into A, B and C category with A being the highest quantity, lowest value
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Inventory is classified into A, B and C Category with A being the lowest quantity, highest value
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Either b or c.
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Detailed explanation-1: -It is also known as selective inventory control or SIC. ABC analysis is a method in which inventory is divided into three categories, i.e. A, B, and C in descending value. The items in the A category have the highest value, B category items are of lower value than A, and C category items have the lowest value.
Detailed explanation-2: -What Is ABC Analysis in Inventory Management? ABC analysis is an inventory management technique that determines the value of inventory items based on their importance to the business. ABC ranks items on demand, cost and risk data, and inventory mangers group items into classes based on those criteria.
Detailed explanation-3: -Using ABC classification, inventory is divided into three categories, A (most important), B (fairly important) and C (least important). An ABC inventory classification system, or ABC analysis, is based on the theory that all inventory is not of equal value.
Detailed explanation-4: -’B’ items – 15% of the annual inventory value of your items (likely made up of 30% of your items) ‘C’ items – 5% of the annual inventory value of your items (likely made up of 50% of your items)
Detailed explanation-5: -ABC analysis groups items into three categories (A, B, and C) based on their level of value within a business. Classifying inventory with ABC analysis helps businesses prioritize their inventory, optimize operations, and make clear decisions.