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Production Capacity Reserve of Manufacturer for the Last Day

Question

A manufacturer of industrial sales has production capacity of 1,000 units per day. Currently, the firm sells production capacity for $10 per unit. At this price, all production capacity gets booked about one week in advance. A group of customers have said that they would be willing to pay $15 per unit if capacity was available on the last day. About ten days in advance, demand for the high-price segment is normally distributed with a mean of 250 and a standard deviation of 100. How much production capacity should the manufacturer reserve for the last day?

Summary

This question belongs to supply chain management and discusses about demand for high-price segment distributed with a mean and standard deviation.

Word count: 107

 

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