The Formula for Calculating Safety Stock When an Estimate of Demand

question 115

Multiple Choice

The formula for calculating safety stock when an estimate of demand during lead time and its standard deviation are known is?

• A) SS = lead time * standard deviation
• B) SS = lead time * z
• C) SS = z* standard deviation
• D) SS = z*σ_dl
• E) SS = σ_dl* mean

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Definitions:

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution or to a system.

Interval Estimation

A range of values used to estimate a population parameter, typically expressed as a confidence interval.

Margin of Error

The range within which the true population parameter is expected to lie, with a certain level of confidence.

Confidence

In statistics, it often pertains to the degree of certainty or probability that a parameter falls within a specified range.