Question: Please answer the entire question in excel if possible. A supplier is entering into a contract with a manufacturer to deliver a machine in no
Please answer the entire question in excel if possible.
A supplier is entering into a contract with a manufacturer to deliver a machine in no later than weeks
from now. Due to uncertainty in availability of parts for the machine, the supplier is not sure when it will
be able to deliver the machine. Also, when the machine is delivered, there is a chance that the
manufacturer will judge it as being of inferior quality. The supplier estimates the probability distribution
of the time it takes to deliver the machine is given as below.
Independently of this the company estimates that the probability of rejection due to inferior quality
If the machine is delivered at a least a week ahead of time and the manufacturer judges the quality to be
inferior, the supplier will have time to fix the problem with certainty and still meet the deadline.
However, if the delivery is late, or if it is exactly on time but of inferior quality, the manufacturer will not
pay up
The supplier expects the cost of manufacturing the machine to be $ This is a sunk cost that will be
incurred regardless of the timing or the quality of the machine. The supplier also estimates that the cost to
fix an inferior machine depends on the number of weeks left to fix it: $ if there are three weeks left,
$ if there are two weeks left, and $ if there is one week left. The manufacturer will pay
$ for a machine of sufficient quality delivered on time, but it will pay nothing otherwise. Find the
distribution of profit or loss for the supplier. Then find the mean and standard deviation of this
distribution. Do you think the supplier should sign the contract?
Discrete Pobability Distribution
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
