Measuring shortage in terms of cost per shortage year

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Suppose that instead of measuring shortage in terms of cost per shortage year, a cost of S dollars is incurred for each unit the firm is short. This cost does not depend on the length of time before the backlogged demand is satisfied. Determine a new expression for TC(q, M), and explain how to determine optimal values q* and M*.

4 For the model developed in this section, determine

a the average length of time it takes to meet demand for a unit.

b the fraction of all demanded units that are back- ordered.

Reference no: EM131027505

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