# Question: A company soon will begin production of a new product

A company soon will begin production of a new product. When this happens, an inventory system that fits the model for a serial two-echelon system presented in Sec. 18.5 will be used. At this time, there is great uncertainty about what the setup costs and holding costs will be at the two installations, as well as what the demand rate for the new product will be. Therefore, to begin making plans for the new inventory system, various combinations of possible values of the model parameters need to be checked.
Calculate Q*2, n*, n, and Q*1 for the following combinations.
(a) (K1, K2) = (\$25,000, \$1,000), (\$10,000, \$2,500), and (\$5,000, \$5,000), with h1 = \$25, h2 = \$250, and d = 2,500.
(b) (h1, h2) = (\$10, \$500), (\$25, \$250), and (\$50, \$100), with K1 = \$10,000, K2 = \$2,500, and d = 2,500.
(c) d = 1,000, d = 2,500, and d = 5,000, with K1 = \$10,000, K2 = \$2,500, h1 = \$25, and h2 = \$250.

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