Wingman Distributing Company is expanding its supply chain to include a new distribution hub In South Bend. A key decision involves the number of trucks for the facility. The particular model of truck Wingman is considering can be used 8,000 miles a month and will cost $1,500 a month in capital costs. In addition, each mile a truck is used costs $0.90 for maintenance. A local truck rental firm will rent trucks at a cost of $1.40 per mile. Given the distribution of likely requirements for trucks, management has come up with three alternatives to consider as shown in the table:

Which fleet size will yield the lowest expected monthly costs forWingman?

Transcribed Image Text:

Monthly requirements (miles) Probability Fleet size (trucks) A0,000 80,000 120,000 0.30 0.40 030 5 10 1