Semicon is a start-up company that produces semiconductors for a variety ofapplications. The process of burning in the circuits requires large amounts ofnitric acid, which has a shelf life of only three months. Semicon estimates that itwill need between 1,000 and 3,000 gallons of acid for the next three-monthperiod and assumes that all values in this interval are equally likely. The acidcosts them $150 per gallon. The company assumes a 30 percent annual interestrate for the money it has invested in inventory, and the acid costs the company $35a gallon to store. (Assume that all inventory costs are attached to the end of thethree-month period.) Acid that is left over at the end of the three-month periodcosts $75 per gallon to dispose of. If the company runs out of acid during thethree-month period, it can purchase emergency supplies quickly at a price of$600 per gallon.a. How many gallons of nitric acid should Semicon purchase? Experience with themarketplace later shows that the demand is closer to a normal distribution, withmean 1,800 and standard deviation 480.
Semicon is a start-up company that produces semiconductors for a variety of
applications. The process of burning in the circuits requires large amounts of
nitric acid, which has a shelf life of only three months. Semicon estimates that it
will need between 1,000 and 3,000 gallons of acid for the next three-month
period and assumes that all values in this interval are equally likely. The acid
costs them $150 per gallon. The company assumes a 30 percent annual interest
rate for the money it has invested in inventory, and the acid costs the company $35
a gallon to store. (Assume that all inventory costs are attached to the end of the
three-month period.) Acid that is left over at the end of the three-month period
costs $75 per gallon to dispose of. If the company runs out of acid during the
three-month period, it can purchase emergency supplies quickly at a price of
$600 per gallon.
a. How many gallons of nitric acid should Semicon purchase? Experience with the
marketplace later shows that the demand is closer to a
mean 1,800 and standard deviation 480.
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