ABC Classification - Dollar usage

Has anyone customized items classification based on ABC analysis? What is the criteria used for classification? The one criteria for classification is to classify the inventory based on dollar usage of items for last 12 months? What is the logic one should apply to calculate dollar usage of item for last 12 months?

Does the below logic hold good?
Qty * Standard Cost = Usage
where, Qty = Sales(Qty) + Consumptions (Qty) [By Item]

I am not a ABC expert but shouldn’t you use the Value entries for the item, filtered by dates + sum up the entries?

If all of your items have the same costing method (ie: Std) it’s ok but I doubt it. Then by using the Value entries, if you have variance in your cost, it will be reflected on the bottomline.

Just a thought.

Hi Nitesh,

Using standard cost on item card is not correct. The value entries should be used even if the costing method is standard, if so, which is not mentioned. Check the inventory valuation report, the same way the quantity used and value should be calculated. The quantity shold be calculated from the Item Ledger entry and the value from the value entries.


Thanks a lot Jaques/Rajibh!!