A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine.The parts cost $400 each and have no salvage value.The manager has compiled a frequency distribution for the probable usage of spare parts,as shown.For what range of shortage costs would stocking one spare part constitute an optimal decision?
Definitions:
Purchase Allowances
Reductions in the price paid by a buyer to a seller, due to minor defects or quality issues with the goods provided.
Price Reduction
A decrease in the selling price of products or services, often to drive sales or clear inventory.
Prompt Payment
A financial discipline that involves settling debts quickly, often rewarded by suppliers with discounts.
Purchase Returns
Transactions where buyers return previously purchased merchandise to the seller, often because of defects or errors in the shipment.
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