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CA Intermediate · Cost and Management Accounting · Material Cost

In ABC analysis of inventory, which statement is correct?

In ABC analysis, A items are few in number but account for a large share of total consumption value, so they receive the closest control. C items are numerous but low in value and need only simple control.

  1. AA items are a large number of items with a small share of total value
  2. BC items need the tightest control and frequent review
  3. CA items are a small number of items accounting for a large share of total value and need close controlCorrect
  4. DB items are always ignored in inventory policy

Explanation

ABC analysis classifies items by value of consumption. A items are few in number but carry a high share of value, so they get strict control. C items are many but low in value and need only simple controls. B items get moderate control, not neglect.

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