The ABC analysis used for analyzing inventory is an example of:
A)Safety stock calculation.
B)Regression analysis.
C)Pareto's law.
D)Inventory carrying cost.

Question

Quizplus · Accepted Answer

The ABC analysis is based on Pareto's law, which states that 80% of the effects come from 20% of the causes. In the context of inventory management, it means that 80% of the value of inventory is usually held by only 20% of the items. This analysis helps in categorizing inventory items based on their value and importance, so that appropriate controls and management approaches can be applied to each category.

The ABC Analysis Used for Analyzing Inventory Is an Example