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Problem: Capacity Allocationwith Constraint.

A manufacturer of PPE (personal protective equipment) has introduced two rapid response products to ensure the safety of medical professionals and the general public. The two products are n-95 respirator masks and general surgical masks. N-95 respirator masks have a price (p) of $1.82, cost (c) of $0.6, salvage value (s) of $0.45. Demand (mu) for n-95 respirator masks is 2000 with a standard deviation of 400. Surgical masks have a price of $0.58, cost of $0.2, salvage value of $0.05. Demand for surgical masks is 5000 with a standard deviation of 500. The manufacturer has a limited production capacity of 6000 total units.

A. To maximize expected profits, determine the optimal allocation of production capacity.

B. Given the dire need of n-95 masks, management has chosen to prioritize sufficient supply over profits. This strategy will ensure no stockouts occur. What order quantity of n-95 masks is required?

C. What is the expected profit, stockout, and understock of n-95 respirator masks and surgical masks due to this policy? How do these values compare to the profit maximization policy?