Here are a couple of examples to explain the above. Imagine that LLC installs a regular capacity of C = 600 starts per week, and uses a threshold T = 50 units for the maximum inventory carried at the end of any week. Example 1: The week begins with In1=30 units carried from the previous week, and a demand of Dn = 460 units. Let the random yield for this month be Yn = 0.9. LLC only needs 460 30 = 430 units to pass quality control to satisfy the week's demand. If LLC starts with C = 600 units, then with the yield of 0.9, the number of units that will pass quality control woud be 6000.9 = 540. In this case LLC would have to carry an ending inventory of 540 430 = 110 units. However, LLC can only carry T = 50 units. Therefore the number of starts will be adjusted to 430 50 0.9 533. The total cost incurred in the week would be 600 $100 for regular capacity (even though we don't use all the capacity) plus 50 $30 inventory holding cost. There is no overtime cost. 7 Business 36106