The basic assumption of the ABC approach to inventory management is that:
A)inventory should be divided dependent on the type of cash or credit sale anticipated.
B)most items are ordered,stocked,and sold in a relatively short period of time.
C)firms should receive A customer's order Before incurring inventory Costs.
D)a small portion of inventory represents a large portion of inventory costs.
E)firms should Always Be Consistent in the amount of inventory ordered.

Question

Quizplus · Accepted Answer

The basic assumption of the ABC approach to inventory management is that a small portion of inventory represents a large portion of inventory costs. This approach categorizes inventory items based on their annual consumption value, with A items being the most important and C items being the least important. By focusing on the management of A items, a firm can significantly reduce its inventory carrying costs while ensuring that it maintains adequate stock levels of the most important items.

The Basic Assumption of the ABC Approach to Inventory Management