A job shop has received an order for high-precision formed parts. The cost of producing each part
Question:
A job shop has received an order for high-precision formed parts. The cost of producing each part is estimated to be $65,000. The customer requires that either 8, 9, or 10 parts be supplied. Each good part sold will produce revenue of $100,000. However, if fewer than 8 good parts are produced, none will be purchased; if more than 10 good parts are produced, the excess will not be purchased. The probability of an individual part being acceptable equals 0.85. Determine the expected profits for batch production quantities of 10, 11, and 12. For each, determine the probability of losing money on the transaction. Of the three choices, which is least preferred? Why?
Step by Step Answer:
Facilities Planning
ISBN: 9780470444047
4th Edition
Authors: James A. Tompkins, John A. White, Yavuz A. Bozer, J. M. A. Tanchoco