Consider the following continuous probability density function for a certain type of goods required in a month:
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Consider the following continuous probability density function for a certain type of goods required in a month: fðrÞ ¼ 8 >>>>>>>>< >>>>>>>>: 0 r < 80 f2ðrÞ¼1 5 þ r 400 80 r < 100 f3ðrÞ ¼ 1:5 r 400 100 r 120 0 r > 120 Costs of inventory are as follows: c1 ¼ cost of surplus ¼ 200 c2 ¼ cost of shortage ¼ 9; 000 Like in Model II (slightly modified) of the chapter determine the optimal stock S*, so that the total inventory expected cost, described by the following integral, is minimized: CðSÞ ¼ Z 100 80 c1 S r 2 f2ðrÞdr þ Z S 100 c1 S r 2 f3ðrÞdr þ Z 120 S c1 S2 2r f3ðrÞdr þ Z 120 S c2 ðr SÞ 2 2r f3ðrÞdr:
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Related Book For
Elements Of Numerical Mathematical Economics With Excel Static And Dynamic Optimization
ISBN: 9780128176498
1st Edition
Authors: Giovanni Romeo
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