08 Identify and explain two possible benefits for CLW of holding high inventory (stock) levels. [6]

[BASEL Moderator]

CLW makes wood furniture, including chairs and tables. Demand has risen quickly over the past 3 years and the business needs to increase the scale of production at its factory. The factory is located near the city centre in an area of low unemployment. The Finance Director has produced a business plan, including a balance sheet. The Finance Director is pleased with CLW’s liquidity.

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08 Identify and explain two possible benefits for CLW of holding high inventory (stock) levels. [6]

Possible KN Points:
• Gain economies of scale/bulk buy
• Can meet orders/inventory always available
• Production does not need to stop
• Avoid supply problems