How this calculation works
Inventory items can contribute very different amounts to annual consumption value. ABC analysis ranks those values so attention can be allocated deliberately rather than treating every item as equally important by count. This page calculates annual quantity times unit cost, sorts the items and applies two entered cumulative thresholds. It is a descriptive prioritization model, not an automatic replenishment policy.
Annual value = annual units × unit cost; sort descending and classify by cumulative share before each itemA worked example
Items with annual values eighty, fifteen and five total one hundred. With thresholds eighty and ninety-five, their before-item cumulative shares are zero, eighty and ninety-five. They therefore fall into A, B and C respectively. The end-of-item cumulative shares are eighty, ninety-five and one hundred, which also check the conserved annual-value total.
Good to know
Critical spare parts, supply risk, shelf life and service consequences are not inferred from annual spend. A low-value item can still be operationally essential and should not be ignored because it receives class C. No order quantity, safety stock or recommended control frequency is selected. Use the ranking alongside actual business constraints rather than as a universal Pareto rule.
Reference: Oracle — annual dollar volume ABC classification (opens in a new tab) ↗
What this calculation answers
Inventory items can contribute very different amounts to annual consumption value. ABC analysis ranks those values so attention can be allocated deliberately rather than treating every item as equally important by count.
This page calculates annual quantity times unit cost, sorts the items and applies two entered cumulative thresholds. It is a descriptive prioritization model, not an automatic replenishment policy.
The Inventory turnover and days on hand calculator compares inventory balance with consumption. ABC ranking instead orders annual quantity times unit cost before assigning a cumulative class.
Use the right input conventions
Use annual consumption units and cost per matching unit in one currency. The value is an annual flow, not the current inventory balance or sales revenue. At least one positive annual value is needed.
Threshold B must exceed threshold A. Sorting ties are resolved by item name for deterministic output, so tied-value items near a threshold need careful substantive interpretation.
Interpret the result
This implementation assigns a class using cumulative value percentage before adding the item. An item crossing a threshold remains in the earlier class; items are never split across classes.
Other systems may classify using the after-item percentage, so matching threshold labels alone does not guarantee identical output. The cumulative table makes the selected boundary convention inspectable.
Work through the example
Items with annual values eighty, fifteen and five total one hundred. With thresholds eighty and ninety-five, their before-item cumulative shares are zero, eighty and ninety-five.
They therefore fall into A, B and C respectively. The end-of-item cumulative shares are eighty, ninety-five and one hundred, which also check the conserved annual-value total.
Where the model stops
Critical spare parts, supply risk, shelf life and service consequences are not inferred from annual spend. A low-value item can still be operationally essential and should not be ignored because it receives class C.
No order quantity, safety stock or recommended control frequency is selected. Use the ranking alongside actual business constraints rather than as a universal Pareto rule.
A few questions, answered
Does an item crossing eighty percent move immediately into B?
No. This page uses cumulative percentage before the item, so the threshold-crossing item remains in the earlier class.
What changes in the comparison?
Change both classification thresholds and inspect the explicit boundary convention.