Question
A Kathmandu based solar panel manufacturing company that operates 250 days per year requires50,000 solar cells on an annual basis to assemble their panels. The
A Kathmandu based solar panel manufacturing company that operates 250 days per year requires50,000 solar cells on an annual basis to assemble their panels. The annual holding cost per solar cell isRs. 50. They are currently manufacturing the solar cells and have a production rate of 1000 cells per day.The cost to setup the machinery to begin a production batch costs the company Rs. 10,000 per setup.The company has discovered another solar cell manufacturer in China that can supply the cells at acheaper cost, but ordering the product from them costs Rs. 50,000 per order with an average lead timeof 50 days and a standard deviation of lead time of 15 days. The company will decide to purchase thecells instead of manufacturing it only if it lowers their total cost (product, setup and holding costs). If thecompany wants to maintain a 95% service level what is the maximum price per cell that the companywould be willing to pay to the subcontractor? (95% p value has a Z-score of 1.65)
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