The ABC approach to inventory management is based on the concept that:
A) inventory should arrive at the time it is needed in the manufacturing process.
B) the inventory period should be constant for all inventory items.
C) basic inventory items that are essential to production and also inexpensive should be ordered in small quantities only.
D) a small percentage of inventory items represents a large percentage of inventory cost.
E) one-third of a year's inventory needs should be on hand, another third should be on order, and the last third should be unordered.

Question

Quizplus · Accepted Answer

The ABC approach to inventory management is based on the concept that a small percentage of inventory items represents a large percentage of inventory cost. This approach categorizes inventory items into three groups: A, B, and C based on their value and importance. The A items are the most important and expensive, and therefore require close monitoring and control, while the C items are the least important and least expensive, and can be managed with less attention. This helps companies allocate their resources and focus their efforts on the items that are most critical to their operations.

The ABC Approach to Inventory Management Is Based on the Concept