Which of the following statements regarding inventory models is true?
A) Models using normal distribution assumptions may not represent situations with highly variable daily demand.
B) Models do not have to be consistent with the operational realities of production line and resource constraints.
C) It is usually safe to assume the cost of capital is negligible.
D) Catastrophic events can be reasonably incorporated in working models by use of simulation.

Question

Quizplus · Accepted Answer

Models using normal distribution assumptions may not accurately reflect situations with highly variable daily demand. The assumption of normal distribution implies that demand is spread out evenly around the mean, which may not be the case in situations with highly variable demand. Therefore, models based on normal distribution assumptions may not be appropriate for inventory management in these situations. The other options are not true. Models should be consistent with operational realities, the cost of capital should be considered, and catastrophic events can be incorporated through simulation.

Which of the Following Statements Regarding Inventory Models Is True