Question

One use of inventory is A. to tightly synchronize a​ firm's production with its​ customers' demand. B. to provide a hedge against inflation. C. to tightly synchronize production and distribution processes. D. to ensure that item cost is maximized.

Answer 1

Answer:

B. to provide a hedge against inflation

Explanation:

Inflation diminishes the purchases power of money.  A rise in inflation will result in the organization purchasing fewer quantities of inventory than it had budgeted. The organization will make purchases in bulk to safeguard against itself unexpected changed in raw material prices.

Organizations operate on budgets prepared at the beginning of a financial year. The budgets project the production level and the cost of production. Managers in the organization are expected to operate within the budgets. A rise in inflation may alter the budget estimates. The quantities of inventory planned may cost more than expected. To safeguards against these possibilities, the business will keep a sizable level of inventory.