If it takes a supplier four days to deliver an order once it has been placed and the standard deviation of daily demand is 10,which of the following is the standard deviation of usage during lead time?
A)10
B)20
C)40
D)100
E)400

Question

Quizplus · Accepted Answer

The standard deviation of usage during lead time is equal to the standard deviation of daily demand multiplied by the square root of the lead time.

In this case, the lead time is 4 days and the standard deviation of daily demand is 10. Therefore, the standard deviation of usage during lead time is:

20 = 10 x sqrt(4)

Therefore, the best choice is B) 20.

If It Takes a Supplier Four Days to Deliver an Order