Question

Which of the following statements is a valid reason for chip manufacturers to carry minimal inventory?

a. Rising transportation costs greatly increase the costs of manufacturing and make moving inventory between locations highly expensive.
b. Chip manufacturers maintain low inventories to hedge the move of semiconductor technology away from silicon-based chips.
c. The potential physical and electronic damage to silicon chips if left unused for extended periods of time deters manufacturers from maintaining higher inventories.
d. Chip manufacturers leverage the higher costs of chip-based products to their advantage by keeping supply low compared to demand.
e. Products with a significant chip-based component rapidly fall in value and can cause huge losses when overproduced.

Answer 1

Answer: The correct answer is "e. Products with a significant chip-based component rapidly fall in value and can cause huge losses when overproduced.".

Explanation: The statement "Products with a significant chip-based component rapidly fall in value and can cause huge losses when overproduced." is a valid reason for chip manufacturers to carry minimal inventory Since if you did not have a minimum inventory, you could incur large losses, as a result of a fall in the value of products with a chip-based component.