Solutions To Sample Problems From Chapter 5

a) X = 32
s = 9.55

5.3

b) Interval

#Obs.

<20
20-27
28-33
34-37
38-43
>43
Total

Frequency

4
8
9
4
6
5

.111
.222
.250
.111
.167
.139

36

1.000

Let X = number of gallons used in one week. Then

P{X 19} = P(Z<(19 32)/9.55) = P(Z < -1.36) =
0.869
Other probabilities are computed in a similar fashion giving:
Probability

Interval

19
27
33
37

X = 19
< X =
< X =
< X =
< X =
43 < X

Total

27
33
37
43

.0869
.2146
.2383
.1587
.1764
.1251
1.0000

Observed Frequency
.1111
.2222
.2500
.1111
.1670
.1380
1.0000

Clearly there is a very close agreement between the probabilities and the observed
2
frequencies. (A formal 2 goodness of fit test gives = .859 from which one
concludes that the normal provides a very good fit.
c) Let Y = X1 + X2 + ... + X6
Then E(Y) = (6)(32) = 192
Y

(6)(9.457) 2 = 23.385

200 192

P{Y 200} = P Z
= P{Z .342} = .6331

23.385

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

a) c0
cu

= .08 - .03 = .05

= .35 - .08 = .27
Critical ratio =

.27
.05 + .27

= .84375

From the given distribution, we have:

Q

f(Q)

F(Q)

.05

.05

.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)

2 =

xf(x)
x2f(x)
=

= (0)(.05) + (5)(.10) +...+(35)(.05) = 18

- 2 = 402.5 - (18)2 = 78.5
(2)(32)(1032)
.36

8.86

The z value corresponding to a critical ratio of .84375 is 1.01.

Hence,
Q* =

z + = (8.86)(1.01) + 18 = 26.95 ~ 27.

5.11

a) X
2
s
b)

= 34.0
= 204.4 (s = 14.3)
cu = 60 - 40 = 20
c0 = 40 - 29 = 11
20
20 + 11

Critical ratio =

z + = (14.3)(.37) + 34 = 39.3 39

z = .37,

Q* =

Value

#Times
Observed

c)

= .6452

Relative
Freq.

Cum
Freq.

10

.1

.1

20

.1

.2

30

.4

.6
< - - - critical ratio
= .6452

40

.2

.8

50

.1

.9

60

.1

1.0

33 by linear interpolation.

d) The normal approximation is not very accurate since the order quantity it
recommends is almost 20% too large.
5.13

a)

h
K
p

=
=
=
=
=
=

(1.50)(.28) = .42
100
12.80
(280)(12) = 3360
(280)(5) = 1400
77 5 = 172.18
2K
+
h

EOQ = Q0 =

1 - F(R1)
z1 = 2.24,

(2)(100)(3360)
.42

Qh
(1265)(.42)
=
p (12.80)(3360)

= 1265

= .0124

L(z1) = .0044,

n(R1) = .75

Q1

2
[K + pn(R)] =
h

Qh (1324)(.42)
=
p 12.80(3360)

1 - F(R2) =
z2 = 2.23

Q2

(2)(3360)
[100 + 12.80(.75)]
.42

.0129

L(z2) = .004486

2(3360)
[100 + 12.80(.77)]
.42

= 1324

n(R2) = .77

= 1326

Close enough to stop.

z = 2.23, R = z + = (172.18)(2.23) + 1400
=1784
Optimal (Q,R) = (1326,1784)

b)

G(Q,R)

K
Q
p n(R)
+h
+ R +
2

Q
Q

K (100)(3360)
=
Q
1326

Q
h + R
2

$253.39

$439.74

pn(R) (12.80)(3360)(.77)
=
Q
1326

= $24.97

c) = 0 EOQ solution

cost =

2K h = (2)(100)(3360)(.42)

= $531.26

G(Q,R) = $718.10
cost of uncertainty = $718.10 - 531.26 =
$186.84 yearly.
5.16

Type 1 service of 95%

Q = EOQ = 1265
F(R) = .95,

= 1.645, which gives R = 1683.

5.23

a) From the solution of problem 14

(Q,R) = (81,124)
Set s = R = 124
S = R + Q = 205
b) x1 = 26 < 124 order to 205 in January.
(order quantity = 205 - 26 = 179)
x2 = 205 - 37 = 168.

do not order in February.

x3 = 168 - 33 = 135.

do not order in March.

x4 = 135 - 26 = 109 < 124.

order to 205 in April.
(order quantity = 205 - 109 = 96)
x5 = 205 - 31 = 174.

do not order in May.

x6 = 174 - 14 = 160.

do not order in June.

(x7 = 160 - 40 = 120

order 85 units in July.)

5.25 a)
Fraction

Cum
Annual

Annual

Profit

Profit

of
Item

Volume

Profit

Total
Costume Jewelry

1900

$15.00

28500.00

28500.00

Novelty Gifts
A

2050

$12.25

25112.50

53612.50

Earrings

1285

$3.50

4497.50

58110.00

575

$6.85

3938.75

62048.75

875

$4.50

3937.50

65986.25

Tee Shirts

1550

$1.25

1937.50

67923.75

Greeting Cards

3870

$0.40

1548.00

69471.75

7000

$0.10

700.00

70171.75

0.41
0.76

0.83
Children's Clothes
0.88
Men's Jewelry
0.94
B

0.97
0.99
Chocolate Cookies
1.00
C

b) The cookies attract customers to the store. (In retail parlance, it would be known
as a loss leader.)