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How many gallons of raw material should they purchase

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Reference no: EM13234812

Problem : Newsboy

Goop Inc. needs to order a raw material to make a special polymer. The demand for the polymer is forecasted to be normally distributed with a mean of 250 gallons and a standard deviation of 125 gallons. Goop sells the polymer for $25 per gallon. Goop purchases raw material for $10 per gallon and Goop must spend $5 per gallon to dispose of all unused raw material due to government regulations. One gallon of raw material yields one gallon of polymer. If demand is higher than Goop can make, then Goop sells only what they can make and the remainder of demand is lost.

a. Suppose Goop purchases 150 gallons of raw material. What is the probability that they will run out of raw material?

Probability of Running Out (%) ______________

b. Suppose Goops orders 300 gallons of raw material. How many gallons of demand on average would remain unfulfilled?

Average Demand Unfulfilled (gallons) _____________

c. Suppose Goop orders 400 gallons of raw material. How much can they expect to spend on disposal costs?

Disposal Costs ($) _____________

d. Suppose Goop wants to ensure that there is a 92% probability that they will be able to meet all customer demand. How many gallons of raw material should they purchase?

Raw Material to Purchase (gallons) _____________

e. How many gallons of raw material should Goop purchase if the objective is to maximize expected profit? What is the expected profit associated with this purchase?

Raw Material to Purchase (gallons) _____________

Expected Profit ($) _____________

Reference no: EM13234812

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