Question: A manager is going to purchase new processing equipment and must decide on the number of spare parts to order with the new equipment. The

A manager is going to purchase new processing equipment and must decide on the number of spare parts to order with the new equipment. The spares cost $200 each, and any unused spares will have an expected salvage value of $50 each. The probability of usage can be described by this distribution:

Number	0	1	2	3
Probability	0.10	0.50	0.25	0.15

If a part fails and a spare is not available, two days will be needed to obtain a replacement and install it. The cost for idle equipment is $500 per day. What quantity of spares should be ordered? a. Use the ratio method. (Round the SL answer to 2 decimal places and the number of spares to the nearest whole number.)

Service Level is __, so we need to order __ spares

b. Use the tabular method and determine the expected cost for the number of spares recommended. (Do not round intermedicate calculations. Round your final answer to 2 decimals.)

Expected Cost __

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