A manufacturing firm has signed a contract to produce a
product to demand, receiving $500 per unit. The firm could either produce the
product itself or outsource the production. Demand is exponentially distributed
with a mean of 10,000 units per year. In-house production has
normally-distributed fixed costs with mean of $500,000 and a standard deviation
of $100,000 and normally-distributed variable costs with mean $200 and standard
deviation of $10. Outsourcing has no fixed cost, but variable costs are $250.
a. Create a diagram for this problem b. Forecast the profit for each alternative
c. Determine the difference in profit d. Determine the probability that each
alternative achieves at least $0 profit, $100,000 profit, and $200,000 profit

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