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

Standard deviation over the review and lead time period can be calculated as follows:

σ_(RL )=σ_d √(RL )=10√(15+10)=10√25=10×5=50

where 
σd = standard deviation of daily demand
RL = review period + lead time

Therefore, the standard deviation of demand over the review and lead time period is 50.

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