O’Brien Chemicals makes three types of products: industrial cleaning, chemical treatment, and some miscellaneous products. Each is sold in 55-gallon drums. The selling price and unit manufacturing cost are shown below: 

Fixed costs are assumed normal with a mean of $5 million and a standard deviation of $20,000. Demands are all assumed to be normally distributed with the following means and standard deviations: 

The operations manager has to determine the quantity to produce in the face of uncertain demand. One option is to simply produce the mean demand for each product; depending on the actual demand, this could result in a shortage (lost sales). The other option is to produce at a level equal to the 75th percentile of the demand distribution for each product (that is, find the value so that 75% of the area under the normal distribution is to the left). Using Monte Carlo simulation with 150 trials, evaluate and compare summary statistics for these policies and write a report for the operations manager summarizing your findings. Make sure to round normal variates to whole numbers. What trade-offs does the manager have to make?

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Manufacturing Product Type Industrial Cleaning Alkaline Cleaner Acid Cleaner Neutral Cleaner Chemical Treatment Iron Phosphate Zirconium Zinc Phosphate Other Sealant Rust Prevention Selling Price/drum Cost/ drum $700.00 $275.00 $600.00 $225.00 $450.00 $150.00 $920.00 $400.00 $1,350.00 $525.00 $1,400.00 $625.00 $850.00 $600.00 $350.00 $260.00