Question

A product's demand per period is normally distributed with a mean of 100 and standard deviation of 10. The in-stock probability is 99%. The order-up-to model is used to manage inventories. What will happen to expected on-hand inventory if its lead time increases from two to four periods

Answer 1

Answer:

A) It will increase.

Explanation:

As we know that the safety stock is directly proportional to the lead time that means if the safety stock rises than the lead time is also increased and if the safety stock decreased than the lead time is also decreased.

So, in the case when the lead time rises so expected on hand would also increased

hence, the correct option is A

And, the rest of the options are incorrect