A Company Has Had Stable Sales and Production for Several

question 112

Multiple Choice

A company has had stable sales and production for several years.Next year, sales are expected to increase by at least 50%.Assuming that the company maintains its policy for desired ending inventories of finished product and direct materials purchases, what will be the likely effect on the desired ending inventory of finished product?

• A) It will increase
• B) It will decrease
• C) It will stay the same
• D) It will be twice the size of the desired ending inventory of raw materials
• E) None of these

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Definitions:

Consumer Prices

The prices that consumers pay for goods and services, reflecting the cost of living in an economy.

Hyperinflation

An extremely high and typically accelerating inflation rate, often exceeding 50% per month, eroding the real value of the local currency.

Extraordinarily High Inflation

A situation where the price level rises at an excessively rapid rate, severely eroding purchasing power over a short period.

Money Creation

The process by which the money supply of a country or an economic or monetary region is increased.