Look at two scenarios, details of which are provided below, for monthly inventories and sales for a company producing cereal. In both scenarios, the company’s sales are the same.

a. Calculate the inventory investment during each month and the resulting stock of inventory at the beginning of the following month for both scenarios.

b. Does maintaining constant production lead to greater or lesser fluctuations in the stock of inventory? Explain.

Scenario A
Month	Start-of-the-Month Inventory Stock	Production	Sales	Inventory Investment
Jan.	50	50	45
Feb.		50	55
Mar.		50	80
Apr.		50	50
May		50	40

Scenario B
Month	Start-of-the-Month Inventory Stock	Production	Sales	Inventory Investment
Jan.	50	45	45
Feb.		55	55
Mar.		80	80
Apr.		50	50
May		40	40