Reducing inventory by $1 million with a carrying cost of 20% results in savings of $200,000. This reduction directly impacts profit by decreasing the costs associated with holding inventory. References: Inventory management principles highlight the significance of inventory reduction in improving profitability through lower carrying costs. Calculation: $1,000,000×0.20=$200,000\$1,000,000 \times 0.20 = \$200,000$1,000,000×0.20=$200,000.