What is the best number of times to run the process

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You make a perishable, volatile chemical for which you charge $2.25 per liter. You have 75 regular customers for the chemical, each of whom has an independent 90% chance of placing an order on any given day. You also get an average of 30 orders per day from other, non-regular customers; assume the number of non-regular customers per day has a Poisson distribution.

Every order is for one 20-liter container.

You produce the chemical by a process that produces 600 liters of the chemical at a cost of $1300. Each day, you can run the process any whole number of times. Because it is so unstable, any chemical left unsold at the end of the day must be recycled, at a cost of $0.35 per liter.

What is the best number of times to run the process? Consider four possible policies of running the process 1, 2, 3 or 4 times.

Reference no: EM131648851

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