Scenario 9.5
Cranium,Inc. ,purchases term papers from an overseas supplier under a continuous review system.The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day.It costs $60 to process each order and there is a five-day lead-time.The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level.Cranium operates 200 days per year.A normal distribution table is appended to this exam.
-Use the information in Scenario 9.5.What is the standard deviation of demand throughout the five-day lead-time period?

Question

Quizplus · Accepted Answer

To find the standard deviation of demand throughout the five-day lead time period, we need to use the formula: 
Standard deviation of lead time demand = standard deviation of daily demand * square root of lead time. 
Plugging in the values, we get: 
Standard deviation of lead time demand = 30 * square root of 5 = 67.08 units. 
Therefore, the answer is B, about 67 units.

Scenario 9.5 Cranium,Inc. ,Purchases Term Papers from an Overseas Supplier Under a Under