# A firm is to order a new lathe. Is power units is an expensive

### Question Description:

24.99

A firm is to order a new lathe. Is power units is an expensive part and can be ordered only with the lathe. Each of these units is uniquely built for a particular lathe and cannot be used on other lathe. The firm wants to know how many spare units should be incorporated in the order for each lathe. Cost of the unit when ordered with the lathe is Rs. 700/- per units. If a spare unit is needed (because of failure during the service) and is not available, the whole lathe becomes useless. The cost of the unit made to order and the down time cost of lathe is Rs. 9,300/-. The analysis of 100 similar lathes yields the following information given below. Number of Spared 0 1234567 or more. Required. Number of Lathes Requiring 87532111 0 Number of Spare parts. Estimated Probability of occurrence of 0.87 0.05 0.03 0.02 0.01 0.01 0.01 0.00 Indicated number of failures: (b) If in the above problem, the shortage cost of the part is unknown and the firm wants to maintain stock level of 4 parts, find the shortage cost