CS Exec. Costing - Material Lec. 1 Part 3 By Dani Ki Costing (DKC)
(iv) ABC ANALYSIS
With the numerous parts and materials that enter into each and every industrial product, material control lends itself, first and foremost, to a problem of analysis. Such analytical approach is popularly known as ABC analysis (Always Better Control), which is believed to have originated in the `General Electric Company’ of America. ABC plan is based upon segregation of materials for selection control. It measures the money value, i.e., cost significance of each material item in relation to total cost and material value. The logic behind this kind of analysis is that the management should study each item of stock in terms of its usage, lead time,technical or other problems and its relative money value in the total investment in inventories. Critical, i.e.,high value items deserve very close attention, and low value items need to be devoted minimum expense and effort in the task of controlling inventories.
CS Exec. Costing - Material Lec. 1 Part 3 By Dani Ki Costing (DKC)
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CS Executive Material,
Material Lecture 1 Part 3
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