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2 ) A supplier always avoids shortages with overtime production. The company follows a base - stock policy, but the operations manager must decide what
A supplier always avoids shortages with overtime production. The company follows a basestock policy, but the operations manager must decide what basestock level is optimal. Demand is normally distributed with mean and standard deviation The holding cost is only $ per period per unit but if there is a shortage of even just one unit! the supplier must run overtime production with a fixed cost of $ and an extra cost per unit of $ The product can be produced in any quantity during regular or overtime production. By simulating thousands of times, determine the basestock level to the nearest that minimizes the average holdingovertime production cost per period.
a What is the best basestock level?
b What is the average cost per period when using the best base stock level?
c During what proportion of periods is overtime production required for the best basestock levelHint: This will be a very small percentage, less than but greater than
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