Problem $12-41($Algo$)$

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 $$183$ each, and any unused spares will have an expected salvage value of $$53$ each. The probability of

usage can be described by this distribution:

Click here for the Excel Data File

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

$$680$ 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.$)$

Answer is complete and correct.

Expected cost is

$$,201\mathrm{.}50$