Question
Monsanto sells genetically modified seed to farmers. It needs to decide how much seed to put into a warehouse to serve demand for the next
Monsanto sells genetically modified seed to farmers. It needs to decide how much seed to put into a warehouse to serve demand for the next growing season. It will make one quantity decision. it costs Monsanto $8 to make each kilogram (kg) of seed. It sells each kg for $45. If it has more seed than demanded by the local farmers, the remaining seed is sent overseas. Unfortunately, it only earns $3 per kg from the overseas market (but this is better than destroying the seed because it cannot be stored until next year). If demand exceeds its quantity, then the sales are lost - the farmers go to another supplier. As a forecast for demand, it will use a normal distribution with a mean of 300,000 and a standard deviation of 100,000.
(e) Suppose Monsanto wants to make sure that the expected amount of dollars that receives from the sales in the overseas market is less than $390,000. At most how many kg of seeds should it place in the warehouse before the growing season?
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