casting process costs $700 per programmed unit. If the casting is good, then it is manufactured to specifications, at an additional cost of $500 per unit. If a part is not sold, there is a recycling value of $300. The customer has indicated that he is willing to pay $2,000/piece for the set of 20 pieces acceptable; the customer also agreed to pay $1500 for one or two pieces additional. However, the customer does not want to buy less than 20 or more than 22 pieces. Based on historical
The foundry produces parts to order. An order for 20 custom parts was received. The casting process costs $700 per programmed unit. If the casting is good, then it is manufactured to specifications, at an additional cost of $500 per unit. If a part is not sold, there is a recycling value of $300. The customer has indicated that he is willing to pay $2,000/piece for the set of 20 pieces acceptable; the customer also agreed to pay $1500 for one or two pieces additional. However, the customer does not want to buy less than 20 or more than 22 pieces. Based on historical records, the probability distributions shown in the table below were estimated. How many castings must be programmed in order to maximize profit expected? How likely is it to lose money?
Step by step
Solved in 2 steps with 5 images