Reference no: EM131579291

Q: Goop Inc. needs to order a raw material to make a special polymer. The demand for the polymer is forecasted to be Normally distributed with a mean of 250 gallons and a standard deviation of 80 gallons. Goop sells the polymer for $25 per gallon. Goop's purchases raw material for $10 per gallon and Goop must spend $5 per gallon to dispose of all unused raw material due to government regulations. (Assume one gallon of raw material yields one gallon of polymer with no extra cost.) If demand is more than Goop can make, then Goop sells only what they made and the rest of the demand is lost. Assume that the specified distribution of demand is correct and accurately represents possible demand values. Let Expected Sales denote the average value of sales over all the possible demand values. [Thus terms expected, average, and mean are used synonymously, so the mean demand = average demand = expected demand = 250 gallons.] Also note that for each demand value and supply quantity, sales = min(supply quantity, demand value); here the supply quantity = news vendor order quantity. Suppose Goop purchases 350 gallons of raw material to make the special polymer. Pick the most correct response:

a. The expected sales will be less than 250 (the expected demand value).

b. The expected sales will be equal to 250 (the expected demand value).

c. The expected sales will be greater than 250 (the expected demand value).

d. Cannot pick any of the above options because sales is uncertain and we cannot determine the expected sales from the information provided.