You are reviewing a simulation model and find that the analyst who prepared the model used the formula =NORM.INV(RAND() ,50,3) to generate the cost of a product. Which of the following assumptions did the analyst make about the product cost?
I. The minimum cost is 50.
II. The average (mean) cost is 50.
III. The cost is uniformly distributed.

Question

Quizplus · Accepted Answer

The formula =NORM.INV(RAND(),50,3) indicates that the analyst assumed the cost follows a normal distribution with a mean (average) of 50 and a standard deviation of 3. This does not imply a minimum cost of 50 (I is incorrect) nor does it suggest a uniform distribution (III is incorrect), leaving only the assumption about the average cost being correct (II).

You Are Reviewing a Simulation Model and Find That the Analyst