Computing the expected overall cost

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Every year, in the weeks surrounding certain holidays, USPS stations all over the country have a surge in parcels, which contain a lot of eventually useless gifts. USPS collects and maintains data about the number of truckloads of mail they had to deliver during these weeks. The data below demand distribution for the number of trucks that have been used in Austin, TX over the last several years; USPS believes that the current year demand will also follow a similar pattern

# of trucks 15 16 17 18 19 20

Probability 0.10 0.15 0.25 0.2 0.18 0.12

The weekly cost of owning and operating a mail truck at the central post office in Austin has been calculated as $600 per week. In the case of an emergency, trucks can be leased from a central USPS depot. This costs the Austin USPS location $1000.

1. Suppose USPS decides to keep 19 trucks locally for the holiday season. What would be the expected overall cost associated with that decision?

2. What is the optimal number of trucks that minimizes the overall expected cost? What is the corresonding cost?

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Reference no: EM132908565

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