Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2) A supplier always avoids shortages with overtime production. The company follows a base-stock policy, but the operations manager must decide what base-stock level is

image text in transcribed
2) A supplier always avoids shortages with overtime production. The company follows a base-stock policy, but the operations manager must decide what base-stock level is optimal. Demand is normally distributed with mean 10000 and standard deviation 1500 . The holding cost is only $0.05 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 $200 and an extra cost per unit of $2. The product can be produced in any quantity during regular or overtime production. By simulating thousands of times, determine the base-stock level (to the nearest 100 ) that minimizes the average holding/overtime production cost per period. a) What is the best base-stock 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 level)? [Hint: This will be a very small percentage, less than 1% but greater than 0%.]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Management Managing Across Borders And Cultures Text And Cases

Authors: Helen Deresky

9th Global Edition

1292153539, 978-1292153537

More Books

Students also viewed these General Management questions

Question

Dont smell (i.e., too much perfume/cologne).

Answered: 1 week ago

Question

16.2 Explain three trends in the labour movement in Canada.

Answered: 1 week ago