CMA Intermediate · Financial Management and Business Data Analytics · Inventory Management
Sharma Components Ltd. classifies its stores items by annual consumption value. Items that are few in number but account for roughly 70% of the total annual consumption value are placed in one category and given the tightest control. Under ABC analysis, this category is:
The category is A. In ABC analysis, a small number of items carrying about 70% of annual consumption value are classed as A items and receive the strictest control, while B items are moderate and C items are many but low in value.
- ACategory ACorrect
- BCategory B
- CCategory C
- DCategory F
Explanation
ABC analysis ranks items by annual consumption value. A items are few in number but high in value (about 70%), so they need the closest control. B items are moderate and C items are numerous but low in value.
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