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What is the basis of ABC analysis in inventory control?

What is the basis of ABC analysis in inventory control? Correct Answer Annual consumption value

Concept:-

  • ABC analysis: it helps to exercise selective control when confronted. With a large number of items, it rationalizes the number of orders, number of items and reduces the inventory.
    • Step 1: determine annual usage/sales for each item
    • Step 2: determine the percentage of the total usage/sale by item
    • Step 3: rank the items from highest to lowest percentage
    • Step 4: classify the items into ABC categories
  • Class A: 15% of item accounts for 70% - 80% of sales
  • Class B: 30% of items accounts for 15% - 25% of sales
  • Class C: 55% of items account for 5% of sales

Advantages of ABC analysis:

  • Facilitates inventory control and control over-usage
  • Eliminates unnecessary paperwork involved in control procedures
  • Facilitates selective control thereby freeing up management time
  • Reduces stock – holding cost
  • The company is able to concentrate on high-value items.

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Which is the basis of ABC analysis in inventory control?
Which of the following inventory items is examined most frequently in the ABC inventory control system?
Carlos Company had Beginning inventory of TA. 80,000, ending inventory of TA. 110,000 cost of goods sold of TA. 285,000 and sales of TK 475. 000 Carlos's days in inventory is:
Carlos Company had beginning inventory of TA, 80,000 ending inventory of TA. 110,000, cost of goods sold of TA. 285,000, and sales of TK. 475,000. Carlos's days in inventory is
একটি মজুত পণ্যের ক্রয়মূল্য ১৫,৫০০ টাকা ও বাজার মূল্য ১২,৫০০ টাকা, যা বছর শেষে মজুত পণ্যের গণনা থেকে বাদ পড়ে গেছে। এই মজুত পণ্যটি সঠিকভাবে হিসাবভুক্ত হলে ব্যবসার মুনাফার ওপর বিরূপ প্রভাব ফেলবে? (An inventory having cost price and market price of Tk. 15,500 and Tk. 12,500 respectively has been omitted while counting the inventory at the year end. What would be the effect on business profit, if this inventory is properly accounted for?)
Consider the following statements.
1. Inventory includes raw material, finished goods and goods in process.
2. Inventory is the part of working capital.
3. Inventory includes goods likely to be purchased in the coming months.
Which of the statements given above are correct?