Which basic production planning strategy will build inventory and avoid the costs of excess capacity?

The level production strategy is designed to produce goods at a constant rate over time, regardless of the fluctuations in demand. This approach is particularly effective in managing production resources efficiently, allowing a company to build inventory during periods of lower demand while meeting customer needs during peak periods without incurring the costs associated with excess capacity.

By maintaining a steady output, the level production strategy helps to cushion against demand variability, thus minimizing the risk of shortages or delays in fulfilling orders. It allows organizations to avoid the significant costs that can arise from having to scale operations up or down rapidly, which is a common challenge in manufacturing. Instead of relying solely on immediate demand to dictate production levels, this strategy promotes the accumulation of inventory as a buffer against demand uncertainties, ultimately leading to greater stability in production and cost management.

The other options do not focus on inventory building in the context of avoiding excess capacity costs. The chase strategy aligns production with demand, potentially leading to gaps where capacity may be underutilized or overutilized. Cycle counting primarily relates to inventory accuracy rather than production planning. Demand matching is concerned with aligning output directly with customer demand, which can compromise inventory reserves. Thus, level production stands out as the best choice for building inventory and managing capacity effectively.