2. Demand during lead time for Louie's Lobster Pots is distributed as follows:

Probability: 0.05 0.15 0.2

Demand:

20 21

0.3 0.1

0.15

0.05

22 23 24 25 26

a. Use a spreadsheet program to evaluate the expected number of units short per reorder cycle

for reorder points of 20 to 26. What's the expected shortage cost per reorder cycle when the

reorder point is 20 and cost per unit short is $25?

b. What happens to the expected shortage cost (when R = 20 and C, = $25) if the demand dis-

tribution shifts as follows?

Probability:

Demand:

0.2 0.4 0.2 0.1

20

21

0.1

22 23 24

0

0

25 26