Question
The expected annual demand for the newly approved Covid drug MSBA is 50,000, but there is a lot of uncertainty. A plant to produce the
The expected annual demand for the newly approved Covid drug MSBA is 50,000, but there is a lot of uncertainty. A plant to produce the drug will be built at a cost of $16 per unit of capacity, which is a one-time expense. In addition, there is an annual maintenance cost of $0.40 per unit of capacity. The production cost per unit is $0.20. The drug's selling price will be $3.70/unit. Suppose that Z denotes the random demand for the drug in a year, and suppose that a plant is built with an annual capacity of 45,000. No inventory will be built up; the company will produce only what is needed for demand in a year, and no more than capacity. Select the least accurate statement regarding elements of a model for this setting.
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