Question 32

A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine. The parts cost $415 each and have no salvage value. The manager has compiled the frequency distribution for the probable usage of spare parts:9 spare parts with frequency 0.13;10 spare parts with frequency 0.09;11 spare parts with frequency 0.1;12 spare parts with frequency 0.22; and 13 spare parts with frequency 0.46.

For what range of shortage costs would stocking 11 spare parts constitute an optimal decision ?

a. Between 58.53and 97.65

b. Between 140.5and 234.4

c. Between 117.1and 195.3

d. Between 175.6and 292.9