Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The annual demand for Prizdol, a prescription drug manufactured and marketed by the NuFeel Company, is normally distributed with mean 5 0 , 0 0

The annual demand for Prizdol, a prescription drug manufactured and marketed by the NuFeel Company, is normally distributed with mean 50,000 and standard deviation 12,000. Assume that demand during each of the next 10 years is an independent random number from this distribution. NuFeel needs to determine how large a Prizdol plant is to build to maximize its expected profit over the next 10 years. If the company builds a plant that can produce x units of Prizdol per year, it will cost $16 for each of these x units. NuFeel will produce only the amount demanded each year, and each unit of Prizdol produced will sell for $3.70. Each unit of Prizdol produced incurs a variable production cost of $0.20. It costs $0.40 per year to operate a unit of capacity. a. Among the capacity levels of 30,000,35,000,40,000,45,000,50,000,55,000, and 60,000 units per year, which level maximizes expected profit? Use simulation to answer this question.
b. Using the capacity from your answer to part a, NuFeel can be 95% certain that actual profit for the 10-year period will be between what two values?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these General Management questions