1.

ABC Analysis is a business term used to define an inventory

categorization technique often used in materials management. It is also
known as Selective Inventory Control. Policies based on ABC analysis
a. A Items very tight control and accurate records.
b. B Items less tightly controlled and good records.
c. C Items sim!lest controls !ossible and minimal records.
". #he ABC analysis !rovides a mechanism for identifying items that will
have a significant im!act on overall inventory cost$ while also !roviding a
mechanism for identifying different categories of stock that will require
different management and controls.#he ABC analysis suggests that
inventories of an organization are not of equal value.
%"&
#hus$ the inventory
is grou!ed into three categories 'A, B, and C( in order of their estimated
im!ortance.
). *A' items are very im!ortant for an organization. Because of the high
value of these +A, items$ frequent value analysis is required. In addition to
that$ an organization needs to choose an a!!ro!riate order !attern 'e.g.
+-ust. in. time,( to avoid e/cess ca!acity.
*B' items are im!ortant$ but of course less im!ortant than +A, items and
more im!ortant than +C, items. #herefore +B, items are intergrou! items.
*C' items are marginally im!ortant.