Look at two scenarios, details of which are provided below, for monthly inventories and sales for a
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Question:
Look at two scenarios, details of which are provided below, for monthly inventories and sales for a company producing cereal. In both scenarios, the company’s sales are the same.
a. Calculate the inventory investment during each month and the resulting stock of inventory at the beginning of the following month for both scenarios.
b. Does maintaining constant production lead to greater or lesser fluctuations in the stock of inventory? Explain.
Scenario A | ||||
---|---|---|---|---|
Month | Start-of-the-Month Inventory Stock | Production | Sales | Inventory Investment |
Jan. | 50 | 50 | 45 | |
Feb. | 50 | 55 | ||
Mar. | 50 | 80 | ||
Apr. | 50 | 50 | ||
May | 50 | 40 |
Scenario B | ||||
---|---|---|---|---|
Month | Start-of-the-Month Inventory Stock | Production | Sales | Inventory Investment |
Jan. | 50 | 45 | 45 | |
Feb. | 55 | 55 | ||
Mar. | 80 | 80 | ||
Apr. | 50 | 50 | ||
May | 40 | 40 |
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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