a beer distributor incurs a penalty cost of $2 per case of shortage and a $1 cha

Question

a beer distributor incurs a penalty cost of $2 per case of shortage and a $1 charge per case left over in inventory at the of the week. assume that the demand (in number of cases ordered) follows the discrete distribution given in the table below.

                         demand          probability

                            10                       .2

                            20                       0.3

                            30                       0.3

                            40                       0.1

                            50                       0.1

a)what is the optimal number of cases to have on hand to minimize expected total costs in a single week? show calculations

b)what is the expected cost?

Explanation / Answer

expected demand = 10*0.2+20*.3+30*0.340*0.1+50*0.1 = 26

also for shortage optimal quantity = sqrt((2*A*D/H)(H+K)/k)

letting ordering cost(here missing) = 100

SO QUANTITY =88.31

cost expected = Q/2 *h + stockout cost = 44*1 + (88-58.87)/2 *2 =73.12

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.