Reference no: EM13835283

Netshell is a video streaming company based on Amazon's cloud computing platform. At the beginning of every year, Netshell has to decide how much daily streaming capacity (in terms of bytes of data) they want from Amazon. On average, Amazon charges $0.5 for 1 gigabyte (GB) of data capacity per day. If the data that Netshell streams in a day surpasses its capacity (contracted with Amazon), it has to pay $0.75 for each additional 1 GB of data. The margin contribution of streaming 1 GB of data per day is roughly $0.65. The operations team at Netshell uses sophisticated forecasting methods. They conclude that, during winter and spring, when indoor activities are more common, the daily demand of Netshell will be 200,000 GB, with a probability of 0.4, and 400,000 GB with a probability of 0.6. During summer and fall, when the demand for video streaming is generally

low, the forecasted demand for Netshell is 150,000 GB with a probability of 0.4 and 250,000 GB with a

probability of 0.6. Assume that half of the days in the year fall into the winter and spring category.

What is the expected demand for Netshell in Winter and Spring?