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

Question

Quizplus · Accepted Answer

In the reorder point formula for a fixed-order-quantity inventory model, the standard deviation of usage during lead time is calculated using the formula: standard deviation of daily demand x square root of lead time. Therefore, the first step is to calculate the standard deviation of daily demand.

In Order to Determine the Standard Deviation of Usage During