If a firm uses level production with seasonal sales and sales decline further than expected,
A) inventory will increase.
B) inventory will decrease.
C) accounts receivables will increase.
D) inventory and accounts receivables will increase.

Question

Quizplus · Accepted Answer

Level production means the firm produces the same amount each month regardless of the demand. If seasonal sales decline more than expected, there will be an excess of inventory as the production level remains constant. Therefore, inventory will increase. Accounts receivables may or may not increase depending on how the firm handles its receivables.

If a Firm Uses Level Production with Seasonal Sales and Sales