Homework_7_InventoryManagement_Solution

Homework_7_InventoryManagement_Solution - 311 Operations...

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311 Operations Management Fall 2007 Homework 7: EOQ and Newsvendor Due 11/20/2007 1. (20 pts; 10 pts for (a) and (b) each) Problem 9 page 620 in the textbook. a) D = 1000 units/year, S = $10, H = $2 /unit/year Q 2 = 2*S*D/H, Q = 100 b) At Q = 100, the annual cost (excluding purchase cost) is D/Q*S+Q/2*H = 100 + 100 = $200 At Q = 500, the annual cost (excluding purchase cost) is D/Q*(S – 100) +Q/2*H = –180 + 500 = $320 Q = 100 is the right decision. 2. (20 pts.) Jean and Jill’s Bakery bake fresh pies every morning. The daily demand for Jean and Jill's apple pies is a random variable with (discrete) distribution, based on past experience, given by: Demand 5 10 15 20 25 30 Probability 10% 20% 25% 25% 15% 5% Each apple pie costs Jean and Jill $6.75 to make and is sold for $17.99. Unsold apple pies at the end of the day are purchased by a nearby soup kitchen for 99 cents each. Assume no goodwill cost. a)
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This note was uploaded on 07/03/2008 for the course BUAD 311 taught by Professor Vaitsos during the Fall '07 term at USC.

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Homework_7_InventoryManagement_Solution - 311 Operations...

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