The annual sales (in ¥10,000) of eight products are: product 1: 380, product 2: 55, product 3: 260, product 4: 30, product 5: 130, product 6: 85, product 7: 40 and product 8: 20. An ABC analysis sorts them in descending order of sales and classifies products with a cumulative share of 70% or less as A, over 70% up to 90% as B, and the rest as C. Which products are classified as B?

Answer: C. Products 5 and 6

Total sales are 1,000 (that is, ¥10 million). Sorting in descending order and computing cumulative shares gives product 1: 38%, product 3: 64%, product 5: 77%, product 6: 85.5%, product 2: 91%, product 7: 95%, product 4: 98% and product 8: 100%. Products 1 and 3, at 70% or less, are A; products 5 and 6, over 70% up to 90%, are B; and the remaining four products are C. ABC analysis uses a Pareto chart to find the few important items that account for most of the total, so that inventory control and sales efforts can be weighted accordingly.

• A. This is B when the product that first crosses 70% or 90% (product 5 or product 2) is kept in the group above (A or B, respectively). In this question, a product that crosses a boundary goes into the next group.
• B. This is B when cumulative shares are computed in product-number order without sorting by sales.
• C. Correct. These are the two products at cumulative shares of 77% and 85.5%.