Question

Goop Inc needs to order a raw material to make a special polymer. The demand for the polymer is forecasted to be normally distributed with a mean of 200 gallons and a standard deviation of 100 gallons. Goop sells the polymer for $26 per gallon. Goop purchases raw material for $10 per gallon and Goop must spend $6 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 only what has been made can be sold, and the remaining demand is lost.
If a part of the question specifies whether to use Table 13.4, or to use Excel, then credit for a correct answer will depend on using the specified method.
a.	How many gallons should Goop purchase to maximize its expected profit?
b.	Suppose Goop purchases 125 gallons of raw material. What is the probability that it will run out of raw material? Use Table 13.4.
	(Round your answer to 4 decimal places.)
c.	Suppose Goop purchases 275 gallons of raw material. What is the expected sales (in gallons)? Use Table 13.4.
	(Round your answer to 2 decimal places.)
d.	Suppose Goop purchases 400 gallons of raw material. How much should it expect to spend on disposal costs (in $s)? Use Table 13.4.
	(Round your answer to 2 decimal places.)
e.	Suppose Goop wants to ensure that there is a 94% probability that it will be able to satisfy the customer’s entire demand. How many gallons of the raw material should it purchase? Use Table 13.4.

Answer 1

a) 200

B) 0.7734

D) 1204.8