The daily demand for a spare engine part is a random variable with a probability distribution based on past experience, given by Demand 0 Probability 0.21 1 0.38 2 0.19 3 0.14 4 0.08 Management performs quantitative analysis regularly. This particular part is expected to be obsolete after 300 days (i.e. approximately after 1 year). The parts cost $2000 each when acquired in advance of the 300-day period and $4000 each when purchased on an emergency basis during the 300-day period. Holding costs for unused parts are based on a daily interest rate of 0.1%. Unused parts after 1 year can be salvaged for 50% of their purchase price. How many parts should be acquired in advance of the 300-day period? First compute what cu and co are and then assess Q Hint: Ask yourself - what kind of NEWSBOY PROBLEM this is. Do we have opportunity of a second order (an emergency order) if we have a shortage? Does the second opportunity of ordering cost much more?