Answered: TABLE 13.3 Expected cost for each…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

See similar textbooks

Related questions

Question

A manager is going to purchase new processing equipment and must decide on the number of
spare parts to order with the new equipment. The spares cost $200 each, and any unused spares
will have an expected salvage value of $50 each. The probability of usage can be described by this
distribution:
Number 0 1 2 3
Probability .10 .50 .25 .15
If a part fails and a spare is not available, two days will be needed to obtain a replacement
and install it. The cost for idle equipment is $500 per day. What quantity of spares should be
ordered?
a. Use the ratio method.
b. Use the tabular method (see Table 13.3).

TABLE 13.3
Expected cost for each possible outcome
And the demand probabilities are
If the
stocking
The expected
cost will be
2
3
prob. = .20
prob. =.40
prob. = .30
prob. =.10
level is
1 unit short .40(1)
($4,200) = $1,680
S=D
2 units short .30(2)
3 units short .10(3)
$0
($4,200) = $2,520
($4,200) = $1,260
$5,460
1-unit excess .20(1)
($800) = $160
2 units short .10(2)
($4,200) = $840
S=D
1 unit short .30(1)
($4,200) = $1,260
$0
$2,260
2-unit excess .20(2)
($800) = $320
1-unit excess .40(1)
($800) = $320
S=D
1 unit short .10(1)
($4,200) = $420
$0
$1,060
2-unit excess .40(2)
($800) = $640
1-unit excess .30(1)
($800) = $240
3-unit excess .20(3)
S=D
($800) = $480
$0
$1,360

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.

Similar questions