Illustration of abc analysis, Managerial Accounting

Assignment Help:

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


Related Discussions:- Illustration of abc analysis

What is the amount of liabilities, Find the value of the following: a.  ...

Find the value of the following: a.    If the total assets are Rs. 87,000 and the liabilities are Rs. 47,000, find out the amount of capital. b.    If the capital of propriet

State the working capital turnover ratio, State the Working capital turnove...

State the Working capital turnover ratio  Meaning: this ratio establishes a relation ship among net sales and working capital. Working capital turnover ratio shows the vel

Inappropriate standards-implementation breakdown, Inappropriate standards (...

Inappropriate standards (or targets): This is a problem arising from deficiencies in planning. If not enough time and resources are devoted to setting accurate standards in th

What are the disadvantages of incremental budgeting, Disadvantages of incre...

Disadvantages of incremental budgeting a) Incremental budgeting suppose activities and method of working will continue in the same way b) No incentive for developing their d

Budget Problem, BUDGET PROBLEM The Budget Director of Dave, Inc. with the ...

BUDGET PROBLEM The Budget Director of Dave, Inc. with the assistance of the Controller, Production Manager and the Sales Manager has gathered the following data for use in develop

Describe the selling costs and development costs, Describe the Selling cost...

Describe the Selling costs and Development costs Selling costs: These are costs of seeking to create and stimulate demand (sometimes termed as marketing) and securing orde

Difference between direct labour and indirect labour, Difference between Di...

Difference between Direct labour and Indirect labour Direct labour:- Labour which plays an active and direct part in the production of a particular commodity is called di

Journal Entries and T-account, h. Production orders that had cost 450,000 t...

h. Production orders that had cost 450,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 50% above

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd