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A job shop receives an order for high precision formed parts. The cost of producing each part is approximately $20,000. The customer requires that either 4 or 5 good parts be supplied. Each good part sold will yield $30,000. However, if fewer than 4 good parts are produced, none will be purchased. The probability of an individual part being acceptable to the customer is .80. 1/ Determine the optimum batch production quantity given that the job shop has agreed to supply the formed parts. 2/ Is the situation a profitable one for the job shop? I 3/ If not, how must the selling price be changed for the expected profit to be positive?
When quality discounts are introduced, will optimum order quantity be made smaller, unchanged, or larger? Illustrate by using a numerical example.
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A paper mill produces two grades of paper viz., X and Y. Because of raw material restrictions, it cannot produce more than 400 tons of grade X paper and 300 tons of grade Y paper i
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