Why Do Companies Try to Keep Inventory Low

question 74

Multiple Choice

Why do companies try to keep inventory low?

• A) It keeps production stable.
• B) Money that is not tied up with inventory can be used for other purposes.
• C) The lower the inventory, the more flexibility the company has.
• D) It keeps the employment in check.
• E) It keeps the raw materials market balanced.

---

Definitions:

Production Cost Report

A document summarizing the costs associated with producing a product, including materials, labor, and overhead.

Work In Process

Inventory items that are in the stage of production but are not yet complete; represents a portion of inventory that is in transition from raw materials to finished goods.

Total Materials Costs

The complete sum spent on raw materials required for the production of goods or services.

Process Cost System

A financial recording approach utilized for assigning expenses to alike items which are manufactured in bulk continuously.