Homework Soursethe purchasing manager of a company is trying to determine h
the purchasing manager of a company is trying to determine how many cooling fans the company should have in reverse. If a fan is needed and shortage occures this cost the company 20$ per unit. On the other hand , the holding cost of each idle unit is 15$ based on the historical data the weekly demand of these parts are shown in the table accros, how many cooling fans should purchasing manager order
| weekly demand | probabilty |
| 1 | 0.05 |
| 2 | 0.45 |
| 3 | 0.5 |
Solution
Expected loss if he orders 1 fan = 0.05*0 + 0.45*20 + 0.5*2*20 = 29$
Expected loss if he orders 2 fans = 0.05*1*15 + 0.45*0 + 0.5*1*20 = 17.5$
Expected loss if he orders 3 fans = 0.05*2*15 + 0.45*1*15 + 0.5*0 = 8.25$
So as expected loss is minimum for ordering 3 fans, purchase managaer should order 3 fans.
