In a Safety Stock Problem Where Both Demand and Lead

question 140

Multiple Choice

In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. The standard deviation of demand during lead time is approximately

• A) 15 units
• B) 100 units
• C) 154 units
• D) 500 units
• E) 13,125 units

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Definitions:

Standard Deviation

A statistical measure that quantifies the dispersion or spread of a set of data points.

Variance

A statistical measure of the dispersion of a set of data points in a data set.

Deviations

The differences between observed values and the average of those values within a dataset.

Mean

The arithmetic average of a set of numbers, calculated as the sum of all values divided by the count of values.