It is used best in terms of Quantity and Quality in relation to Inventory Analysis.It is basically 'usage by value'. The cost of each item is multiplied by the number used in a given period and these are tabulated in descending value order.
PER PIECE multiply QUANTITY= VALUE---10% ( in the descending order ) It will be seen that the first 10%items account for 70% ,the next 20% will be of 20% of the value and the last 70% account for 10% of the total value. so.most stringent control is indicated at A then moderate at B and very less at C. So by ABC ANALYSIS it is possible to control inventory quite efficiently and effectively both in terms of cost control and lessning the stock -out position .
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