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 $181 each, and any unused spares will have an expected salvage value of $51 each. The probability of usage can be described by this distribution:

Number	0	1	2	3
Probability	.15	.40	.30	.15

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If a part fails and a spare is not available, 2 days will be needed to obtain a replacement and install it. The cost for idle equipment is $660 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.)

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.)

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