MANAGEMENT

Detailed explanation-1: -In ABC analysis, A items require:a)No safety stock b)Low safety stock c)Moderate safety stock d)High safety stockCorrect answer is option ‘B’.

Detailed explanation-2: -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-3: -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-4: -Hence, we can conclude that ABC analysis doesn’t help to ascertain the minimum level of stock level of raw materials, instead it helps calculate the value of inventory on the basis of its importance.

Detailed explanation-5: -Rationale: In ABC analysis, a few most important “A” category items, which are in terms of value, accounts for more than sixty percent of total inventory cost. So, controlling ‘A” category items produces the vast majority of savings. Answer # 4 is false statement.