Which of the following is NOT an assumption of the Basic FOQ Model?

Which of the following is NOT an assumption of the Basic FOQ Model?

• A. Demand is variable
• B. No uncertainty for demand
• C. Replenishment is instant
• D. Holding, Setup, Purchasing costs are relevant

Answer: (A)

In the context of the Basic Fixed Order Quantity (FOQ) Model, the model makes a number of assumptions to simplify inventory management processes. A crucial assumption of this model is that demand is constant or deterministic rather than variable. This means that the model operates under the premise that the amount sold can be predicted reliably without fluctuations. The correct choice identifies the premise that demand is variable, which stands in opposition to the Basic FOQ Model's assumption of constant demand. When demand is variable, it introduces complexities and uncertainties that the Basic FOQ Model does not account for, making it less effective in managing inventory levels. In addition, the other options reflect valid assumptions of the Basic FOQ Model. It assumes that there is no uncertainty for demand, which allows for precise planning and ordering. The model also assumes that replenishment occurs instantly, meaning that inventory can be refilled without lead time delays. Furthermore, it recognizes that holding costs, setup costs, and purchasing costs are relevant to effectively managing inventory levels and decision-making, which are essential considerations for the model's application.

In the context of the Basic Fixed Order Quantity (FOQ) Model, the model makes a number of assumptions to simplify inventory management processes. A crucial assumption of this model is that demand is constant or deterministic rather than variable. This means that the model operates under the premise that the amount sold can be predicted reliably without fluctuations.

The correct choice identifies the premise that demand is variable, which stands in opposition to the Basic FOQ Model's assumption of constant demand. When demand is variable, it introduces complexities and uncertainties that the Basic FOQ Model does not account for, making it less effective in managing inventory levels.

In addition, the other options reflect valid assumptions of the Basic FOQ Model. It assumes that there is no uncertainty for demand, which allows for precise planning and ordering. The model also assumes that replenishment occurs instantly, meaning that inventory can be refilled without lead time delays. Furthermore, it recognizes that holding costs, setup costs, and purchasing costs are relevant to effectively managing inventory levels and decision-making, which are essential considerations for the model's application.