Which of the following would cause average inventory holdings to decrease, other things held constant?
A) Fixed order costs double.
B) The purchase price of inventory items decreases by 50 percent.
C) The carrying price of an item decreases (as a percent of purchase price).
D) The sales forecast is revised downward by 10 percent.
E) None of the above (all would cause average inventory to increase).

Question

Quizplus · Accepted Answer

If the sales forecast is revised downward by 10 percent, the company would need to lower their inventory levels to prevent excess inventory and associated costs. Therefore, average inventory holdings would decrease.

Which of the Following Would Cause Average Inventory Holdings to Decrease