After describing the ABC Inventory Classification System, give examples of each category for a food item common to a restaurant.
What will be an ideal response?
The ABC system classifies inventory items into three categories based on dollar velocity (purchase price multiplied by annual quantity consumed). The purpose of the ABC system is to focus managerial attention on the most important items.
Category A includes the few high-dollar items that account for the largest percentage of total dollars or are otherwise critical in the production process, thereby deserving close control. Items in this category for fine dining restaurant would be the higher priced entrees (steaks, seafood) and any liquor and wine if it is served.
Category B items are less costly but deserve moderate managerial attention because they still make up a significant share of the firm's total investment. Examples would be less expensive entrees (chicken, side items) and side items such as vegetables.
Category C contains low-cost or non-critical items which do not justify close control. Items would be baking ingredients such as flour, salt and most spices.
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