Suppose You Run a Simulation Model Several Times with Different

question 19

Multiple Choice

Suppose you run a simulation model several times with different order quantities. What can we infer about the the quantity that maximizes the output, the company's profit?

• A) This quantity is the optimal order quantity.
• B) This quantity might be the optimal order quantity, but we also need to consider the company's attitude toward risk.
• C) This is not necessarily the optimal order quantity, because it may have produced the largest profit by luck.
• D) We cannot infer anything about the quantity.

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Definitions:

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, including revenues, expenses, and net income or loss.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly.

Depreciation

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Original Cost

The initial purchase price or cost of acquiring an asset, before any depreciation or amortization.