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%.
C) The carrying price of an item decreases as a percentage of purchase price.
D) The sales forecast is revised downward by 10%.

Question

Quizplus · Accepted Answer

When the sales forecast is revised downward, there will be less demand for the product and therefore less need for inventory. This will cause average inventory holdings to decrease.

Which of the Following Would Cause Average Inventory Holdings to Decrease