Which of the following would NOT generally be a motive for a firm to hold inventories?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand
C) to take advantage of quantity discounts
D) to minimize holding costs
E) to hedge against inflation

Question

Quizplus · Accepted Answer

Holding inventory incurs costs such as storage, insurance, and deterioration, so minimizing holding costs is generally a motive for a firm to reduce inventory levels rather than hold more. A, B, C, and E are all valid reasons for a firm to hold inventory, including decoupling various parts of the production process, providing a selection of goods for anticipated customer demand, taking advantage of quantity discounts, and hedging against inflation.

Which of the Following Would NOT Generally Be a Motive