HiTec has just started to produce supercomputers for a limited period of 4 years. The annual demand, D, for the new computer is described by the following distribution:

The production capacity of the plant is three computers annually at the cost of $5 million each. The actual number of computers produced per year may not equal the demand exactly. An unsold computer at the end of a year incurs $1 million in storage and maintenance costs. A loss of $2 million occurs if the delivery of a computer is delayed by 1 year. HiTec will not accept new orders beyond year 4 but will continue production in year 5 to satisfy any unfilled (backordered) demand at the end of year 4. Determine the optimal annual production schedule for HiTec.

Transcribed Image Text:

p(D = 1) = .5, p(D = 2) = .3, p(D = 3) = 2