Question

When there is probabilistic demand in a multiperiod model, the inventory level will not decrease smoothly and can fall below.

a. False
b. True

Answer 1

b. True

Step-by-step explanation:

The probablistic inventory model include demand and supply variation, it is based on the assumption that the average demand for inventory is constant over period of time. Two method are used based on frequency of order for procuring stocks:

• Single period inventory system.
• Multi period inventory system.

Single period inventory system are applicable for single used product or perishable goods. Here cost are analysed to avoid loss of ordering extra unit of inventory.

Multi period inventory system are applicable for orders or items which can be ordered multi time during production cycle.