Question

You would like to use the periodic review model to compute the desired order quantity for a company. You know that vendor lead time is 5 days and the number of days between reviews is 20. Which of the following is the standard deviation of demand over the review period and lead time (sT L) if the standard deviation of daily demand is 8?

a. 40
b. 200
c. 8
d. 25
e. 100

Answer 1

a. 40

Step-by-step explanation:

The computation of the standard deviation of the demand is shown below:

= 8 × √(5+20)

= 8 × √25

= 8 × 5

= 40

Hence, the standard deviation of the demand is 40

Therefore the first option is correct and the same is to be considered