A General Rule Regarding the Amount of Capacity to Build
Not what you're looking for?
4. Chapter 12: Suppose we are considering the question of how much capacity to build in the face of uncertain demand. Assume that the cost is $20 per unit of lost sales due to insufficient capacity and $2 per unit due to excess capacity. Also assume that there is a cost of $7 for each unit of capacity built. The probability of various demand levels is
Demand (X units) 0 1 2 3 4 5 6 7
Probability of X 0.05 0.10 0.15 0.20 0.20 0.15 0.10 0.05
a. How many units of capacity should be built to minimize the total average cost of the decision?
b. State a general rule regarding the amount of capacity to build.
Purchase this Solution
Solution Summary
The solution states a general rule regarding the amount of capacity to build.
Purchase this Solution
Free BrainMass Quizzes
Measures of Central Tendency
This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.
Terms and Definitions for Statistics
This quiz covers basic terms and definitions of statistics.
Measures of Central Tendency
Tests knowledge of the three main measures of central tendency, including some simple calculation questions.
Know Your Statistical Concepts
Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.