Concept explainers
Demand in each period follows the same
- a. It equals the mean of demand over one period.
- b. It is greater than the mean of demand over one period but less than five times the mean of demand over one period.
- c. It equals five times the mean of demand over one period.
- d. It is even more than five times the mean of demand over one period.
To identify: The statement that is true regarding the mean demand over five periods.
Explanation of Solution
Correct option: (c)
Correct answer:
It equals five times the mean of demand over one period.
Justification:
The demand follows the same normal distribution over the five periods. It is also assumed that the demand is independent across the periods. The mean of demand across multiple periods will be equal to the sum of the means of the demand of the individual periods. All the periods will have the same mean demand. Therefore, the demand over 5 periods will be equal to 5 times the demand in a single period.
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