Deducing Changes in Inventories [LO3]

Ferguson Products Inc., a manufacturer, reported $130 million in sales and a loss of $25 million in its absorption costing income statement provided to shareholders. According to a CVP analysis prepared for management, the company’s break-even point is $120 million in sales.

Required:

Assuming that the CVP analysis is correct, is it likely that the company’s inventory level increased, decreased, or remained unchanged during the year? Explain.