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What is ABC Analysis? Explain. What are its advantages?
ABC analysis means ‘Always Better Control’ is a technique which classifies the various items of inventory according to their importance. It is an analytical method of inventory control which concentrates on the most significant inventory items. For example: A class consists of those items which are less in number but most important in nature. B class consists relatively less important items. C class consists of large number of items which are less important. The importance of various items is decided on the basis of following factors:
- Critical nature of inventory
- Amount of investment
- Value of material consumed.
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