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Here, we create a table for yearly inventory usage in decreasing order, i.e. from high to low consumption.

$\mathrm{Production}\mathrm{of}\mathrm{total}\mathrm{value}=\frac{\mathrm{usage}\mathrm{of}\mathrm{all}\mathrm{products}}{\mathrm{Cumulative}\mathrm{usage}}×100$

As per the ABC analysis, divide the above table into three categories as shown below:

Category A would consist of the top 15 – 20 percent of the item. B would consist of the next 25 – 30 percent of the items and C would consist of the Last 50 items as shown below:

1. Items under A will be15% of the total items for 60 % of the annual consumption value of the items for 30 % of the annual consumption value of the items.
2. Items under B will be the next 35% of the total items for 30% of the annual consumption value of the items.
3. Items under C will be the remaining 50 % of the total items for 10 % of the annual consumptionvalue of the items.

Categorize the items using ABC analysis, as shown below:

Therefore, is recommended that T should employ more labor force on the items with higher value. i.e, Category A than category C, which has lesser importance.

If item 15 is critical to continue operations, it is recommended to be classified in category A because Category A has higher importance and value.