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

Question

Quizplus · Accepted Answer

The standard deviation of demand over the review and lead time can be calculated using the square root of the sum of the squares of the daily demand standard deviations over the total period (review period + lead time). Here, the total period is 7 days (review) + 5 days (lead time) = 12 days. The formula is: sqrt(12) * 8 = 34.64. The closest answer to this calculation is about 27.7.

You Would Like to Use the Fixed-Time-Period Inventory Model to Compute