hmwk5 - ISyE 3232 Stochastic Manufacturing and Service...

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Unformatted text preview: ISyE 3232 Stochastic Manufacturing and Service Systems Spring 2011 J. Dai and H. Ayhan Homework 5 February 2, 2011 Due: at the start of class on Tuesday, Feb. 15 1. Next months production at a manufacturing company will use a certain solvent for part of its pro- duction process. Assume that there is an ordering cost of $1,000 incurred whenever an order for the solvent is placed and the solvent costs $40 per liter. Due to short product life cycle, unused solvent cannot be used in following months. There will be a $10 disposal charge for each liter of solvent left over at the end of the month. If there is a shortage of solvent, the production process is seriously disrupted at a cost of $100 per liter short. Assume that the initial inventory level is x , where x = 0, 100, 300, 500 and 700 liters. (a) What is the optimal ordering quantity for each case when the demand is discrete with Pr { D = 500 } = Pr { D = 800 } = 1 / 8, Pr { D = 600 } = 1 / 2 and Pr { D = 700 } = 1 / 4?...
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