Range of shortage costs would stocking

Reference no: EM13319814

A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine. The parts cost $400 each and have no salvage value. The manager has compiled a frequency distribution for the probable usage of spare parts, as shown. For what range of shortage costs would stocking one spare part constitute an optimal decision?

No. of

Spares Frequency

0 .08

1 .30

2 .24

3 .20

4 .18

Reference no: EM13319814

Questions Cloud

What reorder point should be used : Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of 15 gallons/day and a standard deviation of two gallons/day. Harry has just fired the manager and taken over operating the restaurant himself.

The economic order quantity : A service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an annual basis.

The order quantity that will minimize the sum of ordering : A car rental agency uses 96 boxes of staples a year. The boxes cost $4 each. It costs $10 to order staples, and carrying costs are $0.80 per box on an annual basis.

What is the risk of a stockout : A manager is reordering lubricant when the amount on-hand reaches 422 pounds. Average daily usage is 45 pounds, which is normally distributed and has standard deviation of three pounds per day. Lead time is nine days. What is the risk of a stockout?

Range of shortage costs would stocking : A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine. The parts cost $400 each and have no salvage value. The manager has compiled a frequency distribution for the probable usage of..

What is the effective service level : A firm stocks a seasonal item that it buys for $22/unit and sells for $29 unit. During the season, daily demand can be described using a Poisson distribution with a mean of 2.4. Because of the nature of the item, units remaining at the close of busin..

Compute the predicted probability of smoking for this person : Person #206 in the data set has the following characteristics: cigpric = 67.44, income = 6500, educ = 16, age = 77, restaurn = 0, white = 0, smoke=0. Compute the predicted probability of smoking for this person and comment on the result.

Extend the original model to allow the return to education : Again, start with the original model, but now allow wages to differ across four groups of people: married and black, married and non-black, single and black, and single and non-black. What is the estimated wage differential between married blacks and..

Find the approximate return to the fifth year of experience : At what value of exper does the additional experience actually lower predicted log (wage)? How many people have more experience in this sample?

User Account

All Pages