A machine is expected to use approximately three spare parts during its useful life.The spares cost $200 each and have no salvage value or other use.The manager has ordered five spares.Assuming a Poisson usage rate, what range of shortage cost is implied?
Ce = $200
Mean = 3 (Poisson)
Cs = ?
Assuming a Poisson-distributed variable with a mean of 3, if stocking 5 units is optimal, this implies that the optimal service level must be between .815 and .916
Thus,

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The Answer of A machine is expected to use approximately three spare parts during its useful life.The spares cost $200 each and have no salvage value or other use.The manager has ordered five spares.Assuming a Poisson usage rate, what range of shortage cost is implied?
Ce = $200
Mean = 3 (Poisson)
Cs = ?
Assuming a Poisson-distributed variable with a mean of 3, if stocking 5 units is optimal, this implies that the optimal service level must be between .815 and .916
Thus,

A Machine Is Expected to Use Approximately Three Spare Parts