Probability
Question # 00583434
Posted By:
Updated on: 09/04/2017 11:41 PM Due on: 09/05/2017
A manufacturing firm has signed a contract to produce a product to demand, receiving $500 per unit. The firm could either produce the product itself or outsource the production. Demand is exponentially distributed with a mean of 10,000 units per year. In-house production has normally-distributed fixed costs with mean of $500,000 and a standard deviation of $100,000 and normally-distributed variable costs with mean $200 and standard deviation of $10. Outsourcing has no fixed cost, but variable costs are $250. a. Create a diagram for this problem b. Forecast the profit for each alternative c. Determine the difference in profit d. Determine the probability that each alternative achieves at least $0 profit, $100,000 profit, and $200,000 profit
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Rating:
/5
Solution: Probability