Question: a ) Suppose that in the above problem the stock - out cost is replaced with a Type 1 service objective of 9 5 percent.

a) Suppose that in the above problem the stock-out cost is replaced with a Type 1 service
objective of 95 percent. Find the optimal values of (Q, R) in this case.b)
b) Suppose that in problem 13 a Type 2 service objective of 95 percent is substituted for the
stock-out cost of $12.80. Find the resulting values of Q and R. Also, what is the imputed cost
of shortage for this case?
c) Suppose that the warehouse from problem 13 mistakenly used a Type 1 service objective when
it really meant to use a Type 2 service objective (see problems a and b). What is the additional
holding cost incurred each year for this item because of this mistake?

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