Question 4A manager wants to purchase a new piece of processing equipment and must decide on the number ofspare parts to order with the new equipment. The spares cost $250 each, and any unused spares will havean expected salvage value of $75 each. The distribution of usage of parts is shown in the following table:NUMBER012345FREQUENCY0.20.20.20.150.150.1If the part fails and a spare is not available, it will take three days to obtain a replacement and install it.The cost for idle equipment is $500 per day.a) What quantity of spares should be stocked?b) Assume the supplier of the parts offers a 20 % discount (all units discount) for purchasing fiveunits or more. Do you think the order quantity will be different? If yes, propose the new orderquantity.

The optimal order quantity is the number of units a company needs to order to get the best possible…

Answered: If the part fails and a spare is not…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter5: Network Models

Section: Chapter Questions

Problem 1C

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