CA Intermediate · Financial Management and Strategic Management · Management of Inventory
In the ABC (Always Better Control) analysis of inventory, which statement correctly describes 'A' category items?
A category items are high-value items that make up a small percentage of the total number of items but a large share of consumption value, so they require tight control and frequent review. Low-value, high-count items belong to category C and need only simple control.
- AHigh value items that form a small percentage of total items and need tight controlCorrect
- BLow value items that form a large percentage of total items and need minimal control
- CItems that are consumed only during the festive season
- DItems kept as safety stock regardless of their value
Explanation
ABC analysis classifies inventory by value of consumption. A items are few in number but account for a large share of total value, so they get the closest control. Option B describes C items.
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