A biotechnology manufacturing firm can produce diagnostic test kits at a cost of $20. Each kit for

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A biotechnology manufacturing firm can produce diagnostic test kits at a cost of $20. Each kit for which there is a demand in the week of production can be sold for $100. However, the half-life of components in the kit requires the kit to be scrapped if it is not sold in the week of production. The cost of scrapping the kit is $5. The weekly demand is summarized as follows:
Weekly demand 50 Number of units 200 100 Probability of demand 0.3 0.25 0.05 0.4

How many kits should be produced ech week to maximize the firm's mean earnings?

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Applied Statistics And Probability For Engineers

ISBN: 9781118539712

6th Edition

Authors: Douglas C. Montgomery, George C. Runger

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