The power at Ice Station Lion is supplied via solar cells. Once a year, a plane

Question

The power at Ice Station Lion is supplied via solar cells.
Once a year, a plane flies in and sells solar cells to the ice
station at a price of $20 per cell. Because of uncertainty
about future power needs, the ice station can only guess the
number of cells that will be required during the coming year
(see probability distribution in Table 6). If the ice station
runs out of solar cells, a special order must be placed at a
cost of $30 per cell.
a) Assuming that the news vendor problem is relevant,
how many cells should be ordered from the plane?
b) In part (a), what type of cost is being ignored?

TABLE 6
No. of Cells Probability
50 .20
60 .15
70 .30
80 .10
90 .15
100 .10

Explanation / Answer

here we must calculare expectation of cell

E(x)=50 *0.2 +60 *.15 +70*.30 + ... 100*0.1

= 71.5

b) opportunity cost is ignored

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