Which of the following statements about the ABC inventory classification system

Question

Which of the following statements about the ABC inventory classification system is TRUE?

a. This approach is based on an insight established by Adam Smith in The Wealth of Nations. b. %u201CA%u201D items represent 50 to 60 percent of all the items in inventory and account for 5 to 15 percent of the company%u2019s inventory investment.
c. This approach is utilized because not all of the items in a company%u2019s inventory are equal and so may require differing levels of control.

d. To establish the classification of items into their groups, the items are first ranked from highest %u201Cdollar per unit%u201D value to lowest.

Explanation / Answer

b. %u201CA%u201D items represent 50 to 60 percent of all the items in inventory and account for 5 to 15 percent of the company%u2019s inventory investment.

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