Scenario 9.7 Cranium, Inc., Purchases Term Papers from an Overseas Supplier Under

question 130

Multiple Choice

Scenario 9.7
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.
-Use the information in Scenario 9.7. What is the standard deviation of demand throughout the five-day lead-time period?

• A) about 45 units
• B) about 67 units
• C) about 103 units
• D) about 200 units

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Definitions:

Summer Internship

A temporary employment opportunity offered to students during the summer months to gain practical experience in their field of study.

Law School

An institution of higher learning that offers a professional education in law, preparing students to become attorneys through a curriculum focused on legal theory and practices.

Inelastic Supply

A situation where the quantity of goods provided by producers does not significantly change in response to price fluctuations.

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Refers to the quantity of wheat bread that consumers are willing to buy at different price levels, during a given period.