Illustration of abc analysis, Managerial Accounting

Illustration: ABC analysis

Combine items on the basis of their relative value to form three categories—A, B and C. The data in the table below illustrates the ABC analysis.

1493_table.jpg



The tabular and graphic representation indicates that "Item A" forms a minimum proportion, 15 per cent of total units of all items, but represents the higher value, 70 per cent. On the other hand, "Item C" represents 55 per cent of the total units and only 10 per cent of the total value.  "Item B" occupies the middle place.  Items A and B jointly represent 45 per cent of the total units and 90 per cent of the investment. More than half of the net units are item C, representing merely 10 per cent of the investment. Thus, a tighter control should be exercised on "Item A" in order to maximize profitability on its investment. In case of "Item C" simple controls will be sufficient.

824_graph.jpg

Posted Date: 12/6/2012 6:58:34 AM | Location : United States







Related Discussions:- Illustration of abc analysis, Assignment Help, Ask Question on Illustration of abc analysis, Get Answer, Expert's Help, Illustration of abc analysis Discussions

Write discussion on Illustration of abc analysis
Your posts are moderated
Related Questions
Problem: Fancy Foods Ltd uses a standard costing system to control its material and labour costs. The standard costs for January 2007 were as follows. Standard Costs Materi

Decision-making is an integral part of all management functions. It is the process of choosing the among alternative courses of action. Managers have to

Explain Indirect expanses: These are expanses which can't be directly conveniently and wholly allocated to a specific cost centres or cost units examples of such expanses are h

calculate the net operating income ,  evergreen corp has provided the following data: sales per period 1000 units ,selling price $ 40 per unit , variable manufacturing cost 12 p

Question:   (a) For a business annual sales are Rs 50,000 and variable expenses are Rs 35,000 and fixed expenses are Rs 25,000. The owner wants to earn at least Rs 5,000 as pro

FLEXIBLE BUDGETING Flexible budget may be used in one of two ways: Planning and Control. At the planning stage when budgets are set, to reduce the effect of uncertainty. For ex

Activity Based costing and Functional Based Costing compare them together in terms of efficiency, advantages, disadvantages and accuracy.

Kinematic Pair: A pair is a joint of two elements which permits relative motion. The relative motion among the elements of links that built a pair is needed to be fully constrain

Explain Quality control and Total quality control Quality control (QC) circles can be viewed as a group oriented suggestion system for making improvements. QC circle is a sm