Skip to content

CA Intermediate · Financial Management and Strategic Management · Management of Inventory

In ABC analysis of inventory, which treatment is most appropriate for Category A items?

Category A items are few but account for most of the inventory value, so they need tight control, accurate records and frequent review. Loose control or visual checks are suited to low-value C items, where control costs exceed benefits.

  1. ALoose control with bulk ordering once a year
  2. BTight control with frequent review and accurate recordsCorrect
  3. CNo records, to be checked visually
  4. DControl only through safety stock set at a high level

Explanation

Category A items are a small number of items with high value share, so they justify tight control, close monitoring and frequent review. Loose control and visual checks suit low-value C items.

Did you get it right without looking?

One question tells you little. A timed set on Management of Inventory shows your real accuracy, how long you take and where you lose marks.

Practise Management of InventoryFree diagnostic mock

More Management of Inventory questions