{"id":10767,"date":"2021-11-05T19:20:19","date_gmt":"2021-11-05T13:50:19","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=10767"},"modified":"2024-12-24T15:57:10","modified_gmt":"2024-12-24T10:27:10","slug":"what-is-abc-analysis","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/","title":{"rendered":"What is ABC Analysis | Free Cost Accounting Articles"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e4048a545e3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e4048a545e3\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#What_is_ABC_Analysis\" >What is ABC Analysis?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#ABC_Analysis\" >ABC Analysis<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#Advantages_of_ABC_Analysis\" >Advantages of ABC Analysis<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#1_Selective_Control\" >1) Selective Control<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#2_Control_Inventories\" >2) Control Inventories<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#3_Obsolete_Stocks\" >3) Obsolete Stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#4_Clerical_Cost\" >4) Clerical Cost<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/scholarsclasses.com\/blog\/what-is-abc-analysis\/#5_Equal_Attention\" >5) Equal Attention<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"What_is_ABC_Analysis\"><\/span><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-black-color\">What is ABC Analysis<\/mark>?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-1024x576.jpg\" alt=\"What is ABC Analysis\" class=\"wp-image-10782 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-1024x576.jpg 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-300x169.jpg 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-768x432.jpg 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-1536x864.jpg 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis-640x360.jpg 640w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/11\/What-is-ABC-Analysis.jpg 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;\" \/><figcaption class=\"wp-element-caption\">What is ABC Analysis?<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"ABC_Analysis\"><\/span><strong>ABC Analysis<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A most useful guide to devising a stock control system is often known as &#8216;Pareto Analysis&#8217; (after the name of an Italian Philosopher). The term is also known as <a href=\"https:\/\/youtu.be\/4cLjR_atcf8\" target=\"_blank\" data-type=\"URL\" data-id=\"https:\/\/youtu.be\/4cLjR_atcf8\" rel=\"noreferrer noopener\">ABC analysis<\/a> because it analyses the range of stock items held into three sectors, known as A, B, and C. <\/p>\n\n\n\n<p>ABC analysis is a new technique of classifying and controlling production and store inventories both purchased and manufactured in accordance with the value of the item. It is the starting point for material management. It is the basic analytical management tool that enables top management to place the effort where the results will be greatest. The technique is popularly known as Always Better Control or the Alphabetical approach.<\/p>\n\n\n\n<p>The technique tries to analyze the distribution of any characteristic by the money value of importance in order to determine its priority. In materials management, the technique has been applied in areas needing selective control such as inventory, the criticality of items, obsolete stocks, purchasing orders, receipt of materials, inspection, storekeeping, and verification of bills.<\/p>\n\n\n\n<p>ABC analysis or classification is the principle of Selective Control of inventories and a technique of grouping thousands of stock items handled by an organization. The principle involved is that the degree of control on stock items and the amount of safety stock carried should vary directly with the consumption value of the item involved.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages_of_ABC_Analysis\"><\/span>Advantages of ABC Analysis<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The following are the advantages of ABC Analysis :<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Selective_Control\"><\/span>1) Selective Control<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This approach helps the materials manager to exercise selective control and focus his attention only on a few items when he is concerned with lakhs of store items.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Control_Inventories\"><\/span>2) Control Inventories<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>By concentrating on &#8216;A&#8217; class items, the materials manager is able to control inventories and show visible<br>results in a short span of items.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Obsolete_Stocks\"><\/span>3) Obsolete Stocks<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>By controlling the &#8216;A&#8217; items obsolete stocks are automatically pinpointed.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Clerical_Cost\"><\/span>4) Clerical Cost<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The system also helps in reducing clerical cost and better planning and improved inventory turnover.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Equal_Attention\"><\/span>5) Equal Attention<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>ABC Analysis has to be resorted to because equal attention to A, B, and C items will not be worth while and<br>would be very expensive.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" target=\"_blank\" rel=\"noreferrer noopener\">What is Cost Accounting?<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Meaning of Cost.<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Meaning of Costing<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/introduction-to-cost-accounting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Meaning of Cost Accounting<\/a><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":10782,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[7,1],"tags":[3642],"class_list":["post-10767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-degree-college","category-misc","tag-what-is-abc-analysis"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/10767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=10767"}],"version-history":[{"count":6,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/10767\/revisions"}],"predecessor-version":[{"id":35707,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/10767\/revisions\/35707"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/10782"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=10767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=10767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=10767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}