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

In the ABC (Always Better Control) analysis of inventory, items falling in category 'A' are those that:

Category A items are few in number but account for a large share of total inventory value. Because a small group of items carries most of the money invested, ABC analysis applies the tightest control and monitoring to them, while category C items get simple controls.

  1. AForm a small percentage of items but a large percentage of total inventory valueCorrect
  2. BForm a large percentage of items and a large percentage of total inventory value
  3. CForm a large percentage of items but a small percentage of total inventory value
  4. DForm a small percentage of items and a small percentage of total inventory value

Explanation

ABC analysis classifies items by value of consumption. Category A has few items (about 10%) accounting for most of the value (about 70%), so it needs tight control. Option C describes category C items.

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