A certain large manufacturing company has just hired a new member of its industrial engineering department, a Ms. V. G. Rickson. Rickson, knowing all about coordinated control, selects a family of two items with the following properties:

Di vi Item i (Units/Year) ($/Unit)

1 10,000 0.50 2 1,000 0.40 From accounting records and discussions with operating personnel, she estimates that A = $5, a1 = $1, a2 = $4, and r = 0.2 $/$/year.

a. She computes the best values of T, m1, and m2. What are these values?

b. The production supervisor, Mr. C. W. Donrath, is skeptical of the value of coordination and argues that independent control is less costly, at least for this family of two items. Is he correct? P-96