Which production planning method maintains a stable inventory level while production varies to meet demand?

• A. Chase production method
• B. Level production
• C. Carrying cost
• D. Cash flow

Answer: (A)

This question tests how production planning choices affect inventory stability. The chase production method adjusts production to exactly meet demand in each period, so production varies while inventory stays roughly constant—there’s little to no buildup because you’re not producing ahead of demand. When demand rises, you ramp up production; when it falls, you scale back. Level production, by contrast, keeps the output rate constant and uses inventory to buffer the difference between supply and demand, which means inventory levels will rise and fall over time rather than stay stable. So the method that maintains a stable inventory level while production varies to meet demand is the chase production method.