Answered: Suppose we have found the optimal (R,…

Suppose we have found the optimal (R, S) policy for theback-ordered case and that S 50. Is the following true orfalse?The optimal S for the lost sales case has S 50.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

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Concept explainers

Forecasting in Business

Forecasting is the process of predicting the future based on the past and the present data and circumstances. In other words, forecasting is the act of making a detailed analysis of future events based on the decisions made in the past as well as the present. Forecasting plays a very important role in operational management as it helps in planning and decision-making. It is not only important for the success of a business but also contributes to individual growth and success. Many business organizations or companies have failed due to the shortcomings of their forecasting.

Question

Suppose we have found the optimal (R, S) policy for the
back-ordered case and that S 50. Is the following true or
false?
The optimal S for the lost sales case has S 50.

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Green Thumb, a manufacturer of lawn care equipment has introduced a new product. Each unit cost $150 to manufacture, and the introductory price is to be $200. At this price, the anticipated demand is normally distributed, with a mean of 100 and a standard deviation of 40. Any unsold units at the end of the season are unlikely to be very valuable and will be disposed of in a fire sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the cycle service level (probability of not stocking out) associated with this policy? If the holding costs increase, how does this affect the optimal number of units to manufacturer and the cycle service level? *Note you can construct a graph if you prefer
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