Why Do Entrepreneurs Usually Want to Keep Inventory Levels as Low

question 4

Essay

Why do entrepreneurs usually want to keep inventory levels as low as possible? What are the challenges facing entrepreneurs who want to reduce their inventory levels?

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Definitions:

Budgeted Cost

An estimate of the financial cost for items, production, or projects planned in the future.

Raw Material Purchases

The total cost of all raw materials bought by a company for use in production over a specific period.

Budgeted Raw Material Purchases

The estimated amount of raw materials to be acquired during a specific period to meet production needs, based on forecasted sales.

Budgeted Required Production

The quantity of products that must be produced in a given period to meet sales needs and inventory policies.