Question

Dazzle Productions is about to launch the latest tour of one of the hottest musical acts of the decade. The concert is to play at huge arenas. Lighting, staging and production affects are the best available, yet very costly. Each time a show is cancelled, Dazzle Productions must absorb an average rescheduling cost of $325,000. This cost includes transportation, lodging, setup and teardown, publicity, and administrative costs.

In order to minimize the necessity to reschedule concert dates, Dazzle productions has asked you to study the benefit of leasing backup sound boards for the tour. The sound board used for this tour costs an average of $5,000 per show to lease and transport. The soundboard has a failure rate of 20%.

a. If Dazzle Productions wants to minimize the expected cost of rescheduling a show, how many spare sound boards should the tour carry? Show your calculations in table format.

b. Explain the reasoning for each step in your calculation and identify the type of distribution this is and explain why.

c. State your conclusion in paragraph format explaining to the manager of Dazzle Production why this distribution is useful from a business aspect for the company.

Answer 1