A hardware store rents its one wood chipper. A request for the chipper arrives every 4 days with a standard deviation of 4 days. On average clients rent the chipper for one day. If a request arrives and the chipper is not available, customers rent from another company.

1. What percentage of demand is lost?

a) 25% b) 30% c) 20% d) 15%

2. How many wood chippers are rented per day? In other words, what is the flow rate?

a) .2 rentals/day b) .3 rentals/day c) .6 rentals/day d) . 8 rentals/day

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Montanso is a large bio firm that sells genetically modified seed to farmers. They need to decide how much seed to put into a warehouse to serve demand for the next growing season. They will make one quantity decision. It costs Montanso $8 to make each kilogram (kg) of seed. They sell each kg for $45. If they have more seed than demanded by the local farmers, the remaining seed is sent overseas. Unfortunately, they only earn $3 per kg from the overseas market (but this is better than destroying the seed because it cannot be stored until next year). If demand exceeds their quantity, then the sales are lost the farmers go to another supplier. As a forecast for demand they will use a normal distribution with a mean of 300,000 and a standard deviation of 106,000.

A senior executive at the company asks the following Suppose we were to place 500,000 kilograms in this warehouse. What is the probability that our total revenue will be at least $18,000,000? Dont forget that revenue comes from both local sales and overseas sales. Furthermore, you are concerned with revenue and not profit, so you can ignore costs.

a) 39% b) 29% c) 9% d) 19%