A store sells a special item whose daily demand can be described by the following probabilistic...

 

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A store sells a special item whose daily demand can be described by the following probabilistic density distribution: Daily demand (D) 0 1 2 PD 0.2 0.5 0.3 The store owner is comparing two ordering policies: (1) Order one unit every morning if the stock level is less than 2, else do not order. (2) Order two units every morning if the stock level is zero, else do not order. The cost of ordering one unit per shipment is $100, the cost of ordering two units per shipment is $180, and the cost of holding excess units per unit per night is $10. Immediate delivery is expected. Which policy should the store adopt to minimize the total expected daily cost of ordering and holding? Please justify your answer. (Hint: the long-run expected average cost per day E(C] = ET,C()) A store sells a special item whose daily demand can be described by the following probabilistic density distribution: Daily demand (D) 0 1 2 PD 0.2 0.5 0.3 The store owner is comparing two ordering policies: (1) Order one unit every morning if the stock level is less than 2, else do not order. (2) Order two units every morning if the stock level is zero, else do not order. The cost of ordering one unit per shipment is $100, the cost of ordering two units per shipment is $180, and the cost of holding excess units per unit per night is $10. Immediate delivery is expected. Which policy should the store adopt to minimize the total expected daily cost of ordering and holding? Please justify your answer. (Hint: the long-run expected average cost per day E(C] = ET,C())

Answer rating: 100% (QA)

StockQ PDQ Cumulative Probability 02 02 1 05 07 03 10 ... View the full answer