Textbook Notes (363,126)
Canada (158,212)
MSCI 432 (2)
Chapter 5

Solutions for Chapter 5 The professor gave us these solutions , very helpful - Winter 2010

5 Pages
Unlock Document

University of Waterloo
Management Sciences
MSCI 432
Binyamin Mantin

Chapter 05 - Inventory Control Subject to Uncertain Demand Inventory Control Subject to Uncertain Demand Solutions To Problems From Chapter 5 5.7 A newsboy keeps careful records of the number of papers he sells each day and the various costs that are relevant to his decision regarding the optimal number of newspapers to purchase. For what reason might his results be inaccurate? What would he need to do in order to accurately measure the daily demand for newspapers? 5.7 If he only keeps track of the number of sales, he has no way to accurately estimate the demand since demand = sales + lost sales. He would need some way to gauge the lost sales. One method would be to increase his supply for a period of time so that he would be able to meet all demand. 5.8 Billy’s Bakery bakes fresh bagels each morning. The daily demand for bagels is a random variable with a distribution estimated from prior experience given by Number of bagels Probability sold in one day 0 0.5 5 .1 10 .1 15 .2 20 .25 25 .15 30 .1 35 .05 The bagels cost Billy’s 8 cents to make, and they are sold for 35 cents each. Bagels unsold at the end of the day are purchase by a nearby charity soup kitchen for 3 cents each. a. Based on the given discrete distribution, how many bagels should Billy’s bake at the start of each day? (Your answer should be a multiple of 5) b. If you were to approximate the discrete distribution with a normal distribution, would you expect the resulting solution to be close to the answer that you obtained in part (a)? Why or why not? c. Determine the optimal number of bagels to bake each day using a normal approximation. 2 (Hint: you must compute the mean ▯ and the variance σ of the demand from the given discrete distribution) 5.8 a) c 0 .08 - .03 = .05 c = .35 - .08 = .27 u Critical ratio = .27 = .84375 .05+ .27 From the given distribution, we have: 5-1 Chapter 05 - Inventory Control Subject to Uncertain Demand Q f(Q) F(Q) 0 .05 .05 5 .10 .15 10 .10 .25 15 .20 .45 20 .25 .70 < - - - - .84375 25 .15 .85 30 .10 .95 35 .05 1.00 Since the critical ratio falls between 20 and 25 the optimal is Q = 25 bagels. b) The answers should be close since the given distribution appears to be close to the normal. c) μ = ∑ xf(x) = (0)(.05) + (5)(.10) +...+(35)(.05) = 18 σ = ∑ x f(x) - μ = 402.5 - (18) = 78.5 (2)(32)(10)2 σ = .36 = 8.86 The z value corresponding to a critical ratio of .84375 is 1.01. Hence, Q* = σz + μ = (8.86)(1.01) + 18 = 26.95 ~ 27. 5.10 Happy Henry’s car dealership sells Spyker cars. Once every three months, a shipment of the cars is made. Emergency shipments can be made between these three-month intervals to resupply the cars when inventory falls short of demand. The emergency shipments require two weeks and buyers are willing to wait this long for the cars, but will generally go elsewhere before the next three-month shipment is due. From experience, it appears that the demand for the cares over a three-month interval is normally distributed with a mean of 60 and a variance of 36. The cost of holding a car for one year is $500. Emergency shipments cost $250 per car over and above normal shipping costs. a. How many cars should Happy Henry’s be purchasing every three months? b. Repeat the calculations, assuming that excess demands are back-ordered from one three- month period to the next. Assume a loss-of-goodwill cost of $100 for customers having to wait until the next three-month period and a cost of $50 per customer for bookkeeping expenses. c. Repeat cal
More Less

Related notes for MSCI 432

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.