APICS Certified Supply Chain Professional (CSCP) — Question 389

A manufacturing company which produces in anticipation of future orders and sells its products directly to consumers experiences an unexpected large reduction in consumer demand. This is most likely to increase which type of inventory?

Answer options

• A. Work-in-process (WIP) inventory
• B. Finished goods inventory
• C. Raw material inventory
• D. In-transit inventory

Correct answer: B

Explanation

The correct answer is B, Finished goods inventory, because a decrease in consumer demand means that the products already completed will not sell as expected, leading to increased finished goods. The other inventory types, such as Work-in-process, Raw material, and In-transit, are less affected by immediate changes in consumer demand since they relate to different stages of the production process.