1. Lance Inc. is experiencing a buildup of inventory on an annual basis. Lance has hired you to help understand why this is happening and how to correct it. Lance believes they have a competent management team that generates excellent results with respect to net income. Lance compensates its management team with both a competitive salary and bonus based on achieving a target net income. Lance Inc. has provided the following data for 2018:

Direct materials	$10	per unit
Direct labor	$15	per unit
Variable manufacturing overhead	$20	per unit
Fixed manufacturing overhead	$25,000	per year
Fixed selling and administrative costs	$15,000	per year
Sale price	$75	per unit
Beginning inventory	500	units
Units produced	5,000	units
Units sold	4,500	units

Required:

a) What are the possible reasons Lance is experiencing inventory buildup? You must support your answer.

b) What suggestion(s) do you have for Lance?