Question

If it takes a supplier 25 days to deliver an order once it has been placed and the standard deviation of daily demand is 20, which of the following is the standard deviation of usage during lead time?
A. 50
B. 100
C. 400
D. 1,000
E. 1,600

Answer 1

Answer:

option (B) 100

Explanation:

Data provided in the question:

Number of days supplier takes to deliver an order once it has been placed i.e the lead time = 25 days

Standard deviation of daily demand = 20

Now,

Standard deviation of usage during lead time

= Standard deviation of daily demand × √(Lead time)

= 20 × √25

= 20 × 5

= 100

Hence,

The answer is option (B) 100