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Question
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 current inventory balance of $1,000,000 is lower than usual because of a one-time end of year fire sale.
B) The company is going to change its depreciation method in the coming year.
C) The growth in sales could be as high as 15%.
D) A fixed amount of inventory is required to do business, so inventory doesn't increase proportionally with sales.
Answer
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