The correct answer is:
**B. A manufacturer of seasonal products builds finished-goods inventory before the peak selling period.**
This is a classic example of using inventory to balance supply and demand. By producing and holding inventory in advance of the peak selling season, the manufacturer ensures that it can meet the anticipated surge in demand without overburdening production capacity during the peak period. This strategy helps align supply (production) with demand (seasonal sales) and avoids stockouts or delays in fulfilling customer orders.
The other options describe different inventory strategies, such as maintaining level production (A), safety stock for uncertainty (C), or variety for customer satisfaction (D), but they do not directly illustrate balancing supply and demand in the same way as seasonal inventory buildup.
Why is it B? A manufacturer producing inventory right before its peak doesn't explain "holding" inventory. Also, why not C?
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