Question

You would like to use the fixed-time-period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 5 days and the number of days between reviews is 7. Which of the following is the standard deviation of demand over the review and lead time if the standard deviation of daily demand is 8

A. About 27.7
B. About 32.8
C. About 35.8
D. About 39.9
E. About 45.0

Answer 1

Answer: A.) About 27.7

Step-by-step explanation:

Lead time = 5 days

Number of days between review = 7 days

Standard deviation of daily demand = 8

Standard deviation over review and lead time is given by:

Sqrt [(lead time + number of days between reviews) × standard deviation of daily demand ^2]

Sqrt [(5 + 7) × 8^2]

Sqrt[ 12 × 64]

Sqrt (768)

= 27.7

Standard deviation over review and lead time is about 27.7