The Disadvantage of Building Up Inventory During the Off Season

question 9

Multiple Choice

The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

• A)very low inventory costs because no inventory needs to be carried from period to period.
• B)very high inventory costs because inventory needs to be carried from period to period.
• C)in the fact that a firm could get by with a smaller,less expensive factory.
• D)in the fact that a firm could get by with a larger,more expensive factory.

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Definitions:

Variable Interests

Interests in an entity that change with fluctuations in the entity's net asset value, income, or cash flows.

Residual Profits

Profits remaining after all costs, including capital costs such as interest on loan capital and equity capital, have been deducted.

Common Stock

Represents ownership shares in a corporation, granting holders voting rights and a share in the company's profits via dividends.