Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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. Goop Inc. needs to order a raw material to make a special polymer. The demand for
the polymer is
a standard deviation of 100 gallons. Goop sells the polymer for $25 per gallon. Goop
purchases raw material for $10 per gallon and must spend $5 per gallon to dispose of all
unused raw material due to government regulations. (One gallon of raw material yields
one gallon of polymer.) If demand is more than Goop can make, then Goop sells only
what it has made and the rest of the demand is lost.
a. How many gallons should Goop purchase to maximize its expected profit?
b. Suppose Goop purchases 150 gallons of raw material. What is the probability that it
will run out of raw material?
c. Suppose Goop purchases 300 gallons of raw material. What are the expected sales (in
gallons)?
d. Suppose Goop purchases 400 gallons of raw material. How much should it expect to
spend on disposal costs (in dollars)?
e. Suppose Goop wants to ensure that there is a 92 percent probability that it will be able
to satisfy its customers’ entire demand. How many gallons of the raw material should
it purchase?
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