METAL company has a plant in Chicago that ships truckloads of products to custom
ID: 3290287 • Letter: M
Question
METAL company has a plant in Chicago that ships truckloads of products to customer daily. Shipments from METAL are dependent on customer demands and follow the following distribution. FAST is a trucking company that supplies trucks to METAL. To provide a truck to METAL in a given period, FAST has to plan for truck availability the previous period. IT costs FAST $200 per truck that it plans to make available to METAL. METAL pays FAST $400 per truck used. If METAL needs a truck that FAST does not have, FAST pays METAL a penalty per truck of $200. METAL then goes and rents a truck and driver for a period of time at cost of $800 per truck. a) Provide the planned trucks at FAST that will maximize FAST's profits. b) Given FAST's planned trucks, provide METAL's expected costs. c) An executive at METAL offers FAST the following deal: METAL will guarantee FAST the usage of one truck every period i.e., METAL will pay FAST for one truck whether they need it or not, but in return FAST should provide 100% service level. What would be the impact of this deal on METAL's expected costs and FAST's expected profits? Should FAST accept this offer?Explanation / Answer
excel formula:
Payoff table for FAST'S profit trucks demanded 0 1 2 3 prob 0.2 0.3 0.3 0.2 planned trucks by FAST expected profit 0 0 -200 -400 -600 -300 1 -200 200 0 -200 -20 2 -400 0 400 200 80 3 -600 -200 200 600 0 a) maximum expected profit for FAST=$ 80 For this planned trucks= 2 b) METAL's expected cost when FAST's planned truck=2 trucks demanded 0 1 2 3 prob 0.2 0.3 0.3 0.2 cost for METAL 0 400 800 1400 expected cost for METAL= 640 Dollars c) METAL's expected cost after the new Deal trucks demanded 0 1 2 3 prob 0.2 0.3 0.3 0.2 cost for METAL 400 400 800 1200 expected cost for METAL= 680 DollarsRelated Questions
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