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 10 days and the number of days between reviews is 15. Which of the following is the standard deviation of demand over the review and lead time period if the standard deviation of daily demand is 10?
A) 25
B) 40
C) 50
D) 73
E) 100

Question

Quizplus · Accepted Answer

The standard deviation of demand over the review and lead time period is calculated using the formula: √(L+T) * σ, where L is the lead time, T is the review period, and σ is the standard deviation of daily demand. Here, L = 10 days, T = 15 days, and σ = 10. So, √(10+15) * 10 = √25 * 10 = 50.

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