In Order to Determine the Standard Deviation of Usage During

question 3

Multiple Choice

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order-quantity inventory model, which of the following must be computed first?

• A) Standard deviation of daily demand
• B) Number of standard deviations for a specific service probability
• C) Stock-out cost
• D) Economic order quantity
• E) Safety stock level

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Definitions:

Interest Rate

The amount of interest levied on a loan, represented typically as an annual percentage of the loan's remaining balance to the borrower.

Miller-Orr Model

Describes a cash management strategy aiming to maintain an optimal cash balance through upper and lower cash limit controls.

Opportunity Rate

The return rate a company foregoes by investing in a certain project, often compared to the risk-free rate or another investment option.

Monthly Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business in a given month.