In Problem 16-24, suppose that the demand for the PCs is 0, 1, 2, 3, 4, or 5 with equal probabilities. Further assume that the unfilled demand is not backlogged, but that the penalty cost is still incurred.

(a) Express the situation as a Markov chain.

(b) Determine the long-run probability that a shortage will take place.

(c) If the fixed cost of placing an order is $200, the holding cost per PC per week is $5, and the penalty cost per shortage PC per week is $20, determine the expected ordering and inventory cost per week.

Problem 16-24

Solve Problem 16-23 assuming that the order size, when placed, is exactly 5 PCs.