In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead time?
A) 15 units
B) 100 units
C) 154 units
D) 500 units
E) 13,125 units

Question

Quizplus · Accepted Answer

The formula for calculating standard deviation of demand during lead time is:
SD of demand during lead time = daily standard deviation of demand * square root of lead time

Plugging in the given values, we get:
SD of demand during lead time = 16 * square root(5) = 16 * 2.236 = 35.77 ≈ 36
Therefore, the standard deviation of demand during lead time is approximately 154 units. Option C is the correct choice.

In a Safety Stock Problem Where Both Demand and Lead