Which of the following is true about the ABC approach to managing inventory?
A) It involves determining inventory stocking requirements directly from the financial plan.
B) It involves managing inventories based on the total value of their usage per unit of time.
C) It involves maintaining safety stocks to accommodate unexpected changes in demand and supply.
D) It involves determining the point at which ordering costs equal carrying costs.
E) It involves quantifying the amount of each component needed on the basis of the product demand forecast.

Question

Quizplus · Accepted Answer

The ABC approach involves managing inventories based on the total value of their usage per unit of time, with high-value items receiving closer attention than low-value items. Option A is incorrect as the ABC approach uses more than just financial plans to determine inventory stocking requirements. Option C is a general concept that applies to all inventory management, not just the ABC approach. Option D is a concept related to the Economic Order Quantity model, not the ABC approach. Option E refers to Material Requirements Planning, which is a separate inventory management approach.

Which of the Following Is True About the ABC Approach