Question: Problem 3 - (10 marks) A public utility intends to buy a turbine as part of an expansion plan and must now decide on the

 Problem 3 - (10 marks) A public utility intends to buy

Problem 3 - (10 marks) A public utility intends to buy a turbine as part of an expansion plan and must now decide on the number of spare parts to order. One part. X135. can be purchased for $100 each. Holding+disposal costs are estimated to be 145 percent of the purchase price over the life of the turbine. A stock-out would cost roughly $8,000 due to downtime, ordering, and \"special purchase" factors. Historical records based on the performance of similar equipment operating under similar conditions suggest that demand for the spare part will tend to approximate a Poisson distribution with a mean of 3.2 units for the useful life of the turbine. (a) What is the optimal number of units of this spare part to order? (5 marks} (b) Carrying six spare parts would be the best strategy for what [range of] unit stock-out cost? {5 marks)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Mathematics Questions!