Question

Marlo Stanfield's operation also uses large quantities of prepaid cell phones, on average 1500 per week with a standard deviation of 145. The lead time for their own brand of prepaid cell phones is three weeks and they have a lot size of 350 phones. To ensure they never run out, they keep a safety stock of 500 phones with Proposition Joe. What is the standard deviation of demand during lead time?

A) 251 phones

B) 2187 phones

C) 4500 phones

D) 4751 phones

Answer 1

Answer:

option (A) 251 phones

Explanation:

Data provided in the question:

Average quantities of prepaid cell phones used = 1500 per week

Standard deviation, s = 145

Lead time for their own brand of prepaid cell phones, L = 3 weeks

lot size = 350 phones

Safety stock = 500 phone

Now,

The standard deviation of demand during lead time will be

= Standard deviation × $\sqrt{\textup{Lead time}}$

= 145 × √3

= 251.14 ≈ 251 phones

Hence,

The correct answer is option (A) 251 phones