When should a company use seasonal inventory?

A company should use seasonal inventory when it has the ability to change production rates at a low cost. This approach allows businesses to produce goods in advance of peak demand periods, ensuring they have enough stock available when customer demand surges. Seasonal inventory helps to smooth production and avoid the costs associated with ramping up production or dealing with stockouts during busy seasons. By managing inventory levels wisely, companies can take advantage of lower production costs during off-peak times and meet customer needs without incurring excessive expenses or operational stress during peak demand.

The other choices highlight situations that are less optimal for maintaining seasonal inventory. Consistently low demand doesn't warrant the extra storage of inventory, as it could lead to excess stock. Products that are perishable require a different inventory strategy focusing on minimizing spoilage rather than maintaining seasonal stock. Unpredictable market trends make it challenging to gauge demand accurately, thus complicating the planning and holding of seasonal inventory effectively. Therefore, using seasonal inventory is most beneficial when production flexibility is feasible and aligns with demand fluctuations.