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) Interest rates fall.

Question

Quizplus · Accepted Answer

A decrease in the sales forecast would likely lead to a reduction in inventory holdings, as less inventory would be needed to meet the lower expected sales demand.

Which of the Following Would Cause Average Inventory Holdings to Decrease