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The "sawtooth effect," is named after the jagged shape of the graph of inventory levels over time.

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If it takes a supplier four days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time?


A) 10
B) 20
C) 40
D) 100
E) 400

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Fixed-order quantity inventory models are "event triggered."

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A company has recorded the last five days of daily demand on their only product. Those values are 120, 125, 124, 128, and 133. The time from when an order is placed to when it arrives at the company from its vendor is 5 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R) ?


A) 120
B) 126
C) 630
D) 950
E) 1,200

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Savings from reduced inventory results in increased profit.

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