In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. The standard deviation of demand during lead time is approximately
A) 15 units
B) 100 units
C) 154 units
D) 500 units
E) 13,125 units

Question

Quizplus · Accepted Answer

To calculate the standard deviation of demand during lead time, we need to use the formula:
Standard deviation of demand during lead time = square root of (lead time * daily standard deviation^2)
Plugging in the given values, we get:
Standard deviation of demand during lead time = square root of (5 * 16^2) =  154 units (rounded to the nearest whole number)

In a Safety Stock Problem Where Both Demand and Lead