Spare parts remaining at the end of the time can be salvaged

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At the time of installation of a set of machines in a manufacturing plant, the maintenance department has the opportunity to order spare parts from the manufacturer of the machinery. A certain spare part costs $600, if purchased then. It cannot be bought at a later date. The demand for this part over the life of the machinery is estimated to be normally distributed with a mean of 20 and standard deviation of 10. The machines are expected to be used for 10 years, and any spare parts remaining at the end of the time can be salvaged at $50. If a shortage occurs, the part will have to be specially produced in the company's own machine shop at a cost estimated at $2500, including lost of production. How many of this part should be stocked?

Reference no: EM1387994

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