Unformatted text preview: q such that F ( q ) ≥ p − c v p = 1 2 . So for q = 17 we have 11 20 > 1 2 . For q < 17 F ( q ) < p − c v p = 1 2 . 3. Data: unit retail price is 600, unit delivery charge is 50; consequently the unit penalty cost is p = 650, unit variable cost is c v = 480, unit inventory holding cost is h = 25, and the distribution of demand is: D = d 10 11 12 13 14 15 P { D = d } 1 6 1 6 1 6 1 6 1 6 1 6 • (a) pE [ max { D − 12 , } ] = p = 650 , hE [ max { 12 − D, } ] = 12.5 and E [ C ( Q )] = 480 × 12+650+12.5 = 6422.5. • (b) q is smallest number such that F ( q ) ≥ p − c v p + h = 170 675 = 34 135 ⇒ q = 11. • (c) Now q solves F ( q ) = p − c v p + h = 170 675 = 34 135 ⇒ q = 933 . 13; so order 933 cameras. 1...
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 Fall '07
 Billings
 Prime number, unit retail price, appropriate decision rule

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