Question

If a make-to-stock manufacturing firm with highly seasonal demand follows a level production strategy, which of the following is likely to be true?
A) Inventory will fluctuate significantly during the year.
B) The production rate must be set equal to the demand in the heaviest demand period, and stay at that level all year.
C) It will be difficult to keep the workforce size stable.
D) The firm must make sure that its maximum capacity is at least as high as the heaviest demand period.

Answer 1

Answer: Inventory will fluctuate significantly during the year

Explanation:

If a make-to-stock manufacturing firm with highly seasonal demand follows a level production strategy, then the inventory will fluctuate significantly during the year.

When using a level production strategy, it should be noted that there will be an increase in the inventory during when there are low demand while there'll be a reduction in the inventory during the periods of high demand.