CA Intermediate · Cost and Management Accounting · Material Cost
In ABC analysis of inventory, which statement correctly describes 'A' category items?
In ABC analysis, A category items are few in number but represent a large share of total consumption value, so they require strict control and frequent review. C items are the numerous low-value ones needing only simple control.
- AHigh number of items with low value, needing minimal control
- BSmall number of items with high value, needing strict controlCorrect
- CItems that are used only in emergencies
- DItems with the longest lead times irrespective of value
Explanation
ABC analysis classifies by value of consumption. A items are few in number but account for a large share of value, so they get tight control. Option one describes C items.
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