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B Total y26 Group Number of items (per cent) Inventory value (per cent) A 15 70 30 20 55 10 100 100 Some points emerge

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B Total y26 Group Number of items (per cent) Inventory value (per cent) A 15 70 30 20 55 10 100 100 Some points emerge from Table 8.1. While group A is the least important in terms of the number of items, it is by far the most important in terms of the investments involved. With only 15 per cent of the number, it accounts for as much as 70 per cent of the total value of inventory. The firm should direct most of its inventory control efforts to the items included in this group. The items comprising the B group account for 20 per cent of the investments in the inventory. They deserve less attention than A but more than C which involves only 10 per cent of the total value although number-wise its share is as high as 55 per cent. The A B C analysis is illustrated in Example 8.2. EXAMPLE 8.2 A firm has seven different items in its inventory. The average number of each of these items held, along with their unit costs, is listed below. Items number Average number of units in inventory Average cost per unit 20,000 260.80 10,000 102.40 32,000 28,000 10.28 60,000 30,000 3.00 20,000 1.30 The firm wishes to introduce an A B C inventory system. Suggest a breakdown of the items into A, B and C classifications. 11.00 2 3 4 5 6 7 3.40

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