COST ACCOUNTING
INVENTORY AND PRODUCTION MANAGEMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Applies the Pareto’s law.
|
|
|
Class C will need close attention to monitor.
|
|
|
Class A items are the most critical items.
|
|
|
Based on annual consumption.
|
Detailed explanation-1: -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-2: -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. Inventory control and management are critical for a business. They help to keep their costs under control.
Detailed explanation-3: -ABC analysis divides an inventory into three categories-"A items” with very tight control and accurate records, “B items” with less tightly controlled and good records, and “C items” with the simplest controls possible and minimal records.
Detailed explanation-4: -ABC (Always Better Control) analysis is one of the most commonly used inventory management methods. ABC analysis groups items into three categories (A, B, and C) based on their level of value within a business.