Next month's production at a manufacturing company will use a certain solvent for part of its...

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Next month's production at a manufacturing company will use a certain solvent for part of its pro- duction process. Assume that there is an ordering cost of $1,000 incurred whenever an order for the solvent is placed and the solvent costs $40 per liter. There will be a $10 holding charge for each liter of solvent left over at the end of the month. If there is a shortage of solvent, the production process is seriously disrupted at a cost of $100 per liter short. Assume that the initial inventory level is x liters. (a) What is the optimal order-up-to quantity y* for each case when the demand is discrete with Pr {D = 500} = Pr {D = 800} = 1/8, Pr {D= 600} = 1/4 and Pr {D = 700} = 1/2? (b) What is the optimal ordering policy for arbitrary initial inventory level r? (You need to specify the critical value r* in addition to the optimal order-up-to-quantity y*. When r <x*, you make an order. Otherwise, do not order.) (c) Assume we will use the optimal ordering policy. What is the total expected cost when the initial inventory r = 300? What is the total expected cost when the initial inventory =700? x = Next month's production at a manufacturing company will use a certain solvent for part of its pro- duction process. Assume that there is an ordering cost of $1,000 incurred whenever an order for the solvent is placed and the solvent costs $40 per liter. There will be a $10 holding charge for each liter of solvent left over at the end of the month. If there is a shortage of solvent, the production process is seriously disrupted at a cost of $100 per liter short. Assume that the initial inventory level is x liters. (a) What is the optimal order-up-to quantity y* for each case when the demand is discrete with Pr {D = 500} = Pr {D = 800} = 1/8, Pr {D= 600} = 1/4 and Pr {D = 700} = 1/2? (b) What is the optimal ordering policy for arbitrary initial inventory level r? (You need to specify the critical value r* in addition to the optimal order-up-to-quantity y*. When r <x*, you make an order. Otherwise, do not order.) (c) Assume we will use the optimal ordering policy. What is the total expected cost when the initial inventory r = 300? What is the total expected cost when the initial inventory =700? x =

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Solution Given that there is an ordering cost of 1000 incurred and the solvent cost 40 per litre The... View the full answer