Question Two (15 Marks) The ABC inventory system is a useful technique for determining which inventories should be counted more frequently and managed more closely and which should not. ABC analysis is an inventory application of what is known as the Pareto principle (named after Vilfredo Pareto, a 19th century Italian economist). The Pareto principle states that there are a critical few and trivial many. 2.1. Provide a discussion on the rationale of ranking inventory items in an ABC inventory system. (5 marks) 2.2. You are provided with the following information. Conduct an ABC analysis, categorising each item of stock appropriately. (80% = A, 15% = B, 5%=C) (10 marks) Stock Units Average annual demand per unit in Rands A1 440 840 A2 543 289 A3 79 800 A4 45 567 A5 123 098 A6 47 345 A7 645 000 A8 587 908 A9 208 006 A10 13 895