Home /
Expert Answers /
Operations Management /
monsanto-sells-genetically-modified-seed-to-farmers-it-needs-to-decide-how-much-seed-to-put-into-a-pa124

Monsanto sells genetically modified seed to farmers. It needs to decide how much seed to put into a warehouse to serve demand for the next growing season. It will make one quantity decision. It costs Montanso $6 to make each kilogram (kilogram) of seed. It sells each kilogram for $43. If it has more seed than demanded by the local farmers, the remaining seed is sent overseas. Unfortunately, it only earns $3 per kilogram from the overseas market (but this is better than destroying the seed because it cannot be stored until next year). If demand exceeds its quantity, then the sales are lost—the farmers go to another supplier. As a forecast for demand, it will use a normal distribution with a mean of 350,000 and a standard deviation of 75,000. Use Table 13.4. Note: If a part of the question specifies whether to use Table 13.4, or to use Excel, then credit for a correct answer will depend on using the specified method.

How many kilograms should Montanso place in the warehouse before the growing season? Use Table 13.4 and round-up rule.

If Montanso put 425,000 kilograms in the warehouse, what is its expected revenue (include both domestic revenue and overseas revenue)?Use Table 13.4 and round-up rule.

How many kilograms should Montanso place in the warehouse to minimize inventory while ensuring that the stockout probability is no greater than 1%? Use Table 13.4 and round-up rule.

What is maximum profit for this seed?

TABLE 13.4 The Distribution, \( F(Q) \), and Expected Inventory, I \( (O) \), Functions for the Standard Normal Distribution Function

Mean demand= 3,50,000 Standard deviation = 75,000 Cost price = $6 Selling price = $43 Salvage value = $3 a) Underage cost = Cu = Selling price - Cost