Response to the following problem:
Deducing Changes in Inventories
Ferguson Products Inc., a manufacturer, reported $130 million in sales and a loss of $25 millionin its absorption costing income statement provided to shareholders. According to a CVP analysisprepared 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.