ABC analysis is based upon the principle that
A) all items in inventory must be monitored very closely
B) there are usually a few critical items, and many items which are less critical
C) an item is critical if its usage is high
D) more time should be spent on class "C" items because there are more of them
E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items

Question

Quizplus · Accepted Answer

ABC analysis is based on the Pareto principle or the 80/20 rule, which suggests that a small proportion of items accounts for a significant portion of the value or usage. In other words, there are usually a few critical items (A items) that need close attention, and many items that are less critical (B and C items). The purpose of ABC analysis is to focus the inventory control efforts and resources on the critical items while reducing the effort on the less important ones. Therefore, choice B is the best answer.

ABC Analysis Is Based Upon the Principle That