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 inventory management, this means that a small percentage of items (the A-items) typically account for a large percentage of the inventory value, while a large percentage of items (the C-items) account for a small percentage of the inventory value. This analysis helps managers prioritize their attention and resources on the most important items.

The ABC Analysis Used for Analyzing Inventory Is an Example