Question Completion:
Demand Requirements (in vehicles)
Requirements 20 35 50 80
Probability 0.35 0.15 0.1 0.4
Answer:
Transworld Deliveries
1. Transworld Deliveries should purchase additional vehicles and hire additional drivers.
2. I recommend 14 new vehicles with drivers to bring the number from 35 vehicles to 49 vehicles.
Explanation:
a) Data and Calculations:
Vehicles requirements (Range) 35 and 80
Own Vehicles being moved = 35
Cost of own fleet = $730 per vehicle
Cost of leasing = $1,300 per vehicle
Decision: Purchase additional vehicles or
Lease additional vehicles
Expected Vehicles Required:
Requirements 20 35 50 80
Probability 0.35 0.15 0.1 0.4
Expected value 7 5 5 32
Total expected number of vehicles required = 49
Additional vehicles required = 49 - 35 = 14
Cost of leasing additional vehicle = 14 * $1,300 = $18,200
Cost of purchasing vehicles and hiring additional drivers = $730 * 14 = $10,220
Difference in costs = $18,200 - $10,220 = $7,980
