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ARE 157
Winter 2010
M. Whitney
ANALYSIS FOR PRODUCTION MANAGEMENT
Homework 3Due Monday, March 1st,
in class
1. (8)
Janelle sells copies of the Daily Racing Form, a horseracing betting guide, at Golden Gate Fields racetrack.
She
purchases each copy at wholesale for $3.00, and sells it at retail for $5.00.
The opportunity cost of her time is $.35 per
sale, for the transactions she completes.
Due to their timedependent content, any Racing Forms that are not sold are
discarded at the end of each day for recycling and bring in no revenue.
Based on past sales experience, Janelle knows the probability of selling various quantities of papers is:
# of papers
P(d)
P(D)
25
0
26
.10
27
.25
28
.20
29
.15
30
.15
31
.12
32
.03
33 or more
0
a..
Find P(D), the probability of “stocking out” (selling every copy in stock) for each level of forms ordered.
b.
What is the optimal probability of stocking out?
How many forms should Janelle order each day?
c.
What is the average number of forms she sells per day?
Also, what is the average number of forms she discards each
day?
2. (12) Heavenly Scents produces gift packs containing an assortment of soaps and
lotions.
Demand for the firm’s output
is highly seasonal, peaking in the period before Christmas. The firm’s
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This note was uploaded on 03/18/2010 for the course ARE 157 taught by Professor Whitney during the Winter '08 term at UC Davis.
 Winter '08
 WHITNEY

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