COST ACCOUNTING
INVENTORY AND PRODUCTION MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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80% of sales for a business come from 20% of its inventory
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80% of inventory for a business comes from 20% of its sales
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Detailed explanation-1: -What Is the 80/20 Inventory Management Rule? The 80/20 rule states that 80% of results come from 20% of efforts, customers or another unit of measurement. When applied to inventory, the rule suggests that companies earn roughly 80% of their profits from 20% of their products.
Detailed explanation-2: -The Pareto Principle in business refers to the way 80 percent of a given business’s profit typically comes from a mere 20 percent of its clientele. Business owners who subscribe to the 80/20 rule know the best way to maximize results is to focus the most marketing effort on that top 20 percent.
Detailed explanation-3: -The Pareto Principle, also known as the 80/20 Rule, The Law of the Vital Few and The Principle of Factor Sparsity, illustrates that 80% of effects arise from 20% of the causes – or in lamens terms – 20% of your actions/activities will account for 80% of your results/outcomes.
Detailed explanation-4: -The Pareto principle (also known as the 80/20 rule) is a phenomenon that states that roughly 80% of outcomes come from 20% of causes.