Question

In the context of ABC inventory analysis, which of the following statements is true of class A items? a. They are best managed by automated computer systems. b. They account for a larger percentage of total items than class C items. c. They account for a larger dollar value than class C items. d. They require the least amount of control by operations managers.

Answer 1

Answer:

c. They account for a larger dollar value than class C items

Explanation:

The ABC inventory analysis is a method of classifying inventory in three main groups: A, B and C, where group A items include items that are most valuable and group C items the least valuable ones.

Conceptually similar to the Pareto principle, this method revolves around the fact businesses should focus on a limited scope of products, services or procedures that bring the most profit in comparison to other products/services.

Since group A items are critical to supply chain success, they require close monitoring by the operations managers and are rarely managed by wholly automated systems.

Like in the Pareto principle, A items usually have 10-20% share in the total item share, while they bring 70-80% of total profit.