How to solve the above attaced equition A company receives ail order for 10 mach

Question

How to solve the above attaced equition

A company receives ail order for 10 machined parts. The unit selling price is $1,000. Only one production can be made due to the long setup time required and short due date of the order. If 8 or fewer parts are acceptable, the customer will cancel the order. If 9 or 10 parts are acceptable, the customer will purchase all of them. If more than 10 parts are acceptable, the customer will only buy 10. The remaining parts, good or bad. can be sold for $25 each. The cost of producing a part is estimated to be $600. Find the optimal lot size. Probability mass function PQ(x):

Explanation / Answer

For Lot Size = 10

Mean = (0.2+0.3+0.3+0.2)/4 = 0.25

For Lot Size = 11

Mean = (0.2+0.3+0.3+0.2)/4 = 0.25

For Lot Size = 12

Mean = (0.1+0.2+0.3+0.2+0.2)/5 = 0.2

For Lot Size = 13

Mean = (0.2+0.2+0.3+0.2+0.1)/5 = 0.2

For Lot Size = 14

Mean = (0.2+0.2+0.3+0.2+0.1)/5 = 0.2

Thus Lot Size of 11 is optimal

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