Firm decides whether to produce products by onshore plant

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A firm decides whether to produce products by an onshore plant or an offshore plant. The fixed cost and the variable cost of the onshore plant are $30,000 and $1.0, while the fixed cost and variable cost of offshore plant are $20,000 and $0.8. Both of the two supplier may not be 100% reliable to satisfy all order quest from the firm. Specifically, the onshore plant has 80% probability to meet all order requests and 20% probability to satisfy 90% of the order request. The offshore plant has 60% probability to meet all order request and 40% to satisfy only 80% of the order request. The demand in the next season is 30,000 and the marginal revenue of each unit of product is $4.

Reference no: EM132120249

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