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:

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust to market changes fully.

Marginal Cost

The expense associated with manufacturing an extra single unit of a product or service.

Profit Maximizing

The process of adjusting production and sale strategies to achieve the highest possible profits.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; represents the extra amount over the payment needed to keep a resource in its current use.