ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal, this change will:

Question

Quizplus · Accepted Answer

Switching to a production model where goods are only manufactured upon receiving an actual order reduces the time products spend in inventory before being sold, thereby decreasing the cash cycle. This approach minimizes the gap between paying for production inputs and receiving payment from customers.

ABC Manufacturing Historically Produced Products That Were Held in Inventory