The correct answer is: B. Inventory is classified into A, B and C category with A being the highest value, lowest quantity.
ABC analysis is an inventory control technique that classifies items in an inventory into three categories: A, B, and C. Items in category A are the most important and expensive, and require the most attention. Items in category B are less important and expensive, and require less attention. Items in category C are the least important and least expensive, and require the least attention.
The goal of ABC analysis is to focus attention on the most important items, and to reduce the amount of attention given to the least important items. This can be done by setting different inventory levels for each category, and by using different inventory control methods for each category.
For example, a company might set a high inventory level for category A items, a medium inventory level for category B items, and a low inventory level for category C items. The company might also use a more sophisticated inventory control method for category A items, such as a just-in-time inventory system.
ABC analysis can help a company to reduce costs, improve efficiency, and improve customer service. It can also help a company to better manage its inventory, and to avoid stockouts and overstocks.
Option A is incorrect because it does not specify that inventory is classified into A, B, and C categories. Option C is incorrect because it does not specify that A is the highest value, lowest quantity category. Option D is incorrect because it is not a complete answer.