MDX Sales Corp is expecting a 10% increase in sales next year. MDX has an inventory balance of
$1,000,000 and uses the percent of sales forecasting method.
Which of the following could explain
why the inventory forecast of $1,100,000 might be too high?
A) The growth in sales could be as high as 15%.
B) The company is going to change its depreciation method in the coming year.
C) A fixed amount of inventory is required to do business, so inventory doesn't increase
proportionally with sales.
D) The current inventory balance of $1,000,000 is lower than usual because of a one-time end of
year fire sale.
C
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