Candidate Costs

Order Two Cost

Ordering two units balances a small leftover risk and a small shortage risk.

highlighted = computed this step

Order two

For order quantity 2, the expected overage and underage balance exactly.

q=2q=2
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected overage

Expected overage is 1/4.

E[overage]=1/4E[\text{overage}]=1/4
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected underage

Expected underage is 1/4.

E[underage]=1/4E[\text{underage}]=1/4
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected cost

Expected cost is 2.

E[cost]=2E[\text{cost}]=2
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie