ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The following statement is correct in relation to ABC Inventory classification, EXCEPT:
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Applies the Pareto’s law.
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Class C will need close attention to monitor.
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Class A items are the most critical items.
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Based on annual consumption.
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Explanation:
Detailed explanation-1: -ABC inventory analysis is based on the Pareto Principle, meaning it’s often the case that about 20% of a company’s inventory accounts for 80% of its value.
Detailed explanation-2: -A items: 10%–20% of your inventory, accounting for 60%–80% of your annual consumption value. B items: 20%–30% of your inventory, accounting for 20%–30% of your annual consumption value. C items: 50%–70% of your inventory, accounting for 5%–15% of your annual consumption value.
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