Seattle-Pipes Co. produces pipes to be supplied to a Seattle utility company. The requirement of the...

Seattle-Pipes Co. produces pipes to be supplied to a Seattle utility company. The requirement of the utility company is that the pipes need to be 200 cm long. Longer pipes are acceptable to the utility company but any pipe less than 200 cm is rejected. Seattle-Pipes loses all its production cost on pipes that are rejected.

The production process is such that it has some variability in the lengths of pipes produced, and this variability can be well approximated by a Normal distribution. Seattle- Pipes can adopt one of the following three production processes:

Process A: Produces pipes with an average length of 200 cm and a standard deviation of 0.5 cm
Process B: Produces pipes with an average length of 201 cm and a standard deviation of 1 cm
Process C: Produces pipes with an average length of 202 cm and a standard deviation of 1.5 cm

If Seattle-Pipes adopts the third Process (Process “C”), what is the probability it will haveits pipe rejected by the utility company? Enter your answer as a decimal probability (not a percent) rounded to 4 decimal places.
b) Seattle-Pipes temporarily changes its requirements and has a new requirement that it will accept any pipe of length from 199 cm to 202 cm. That is, pipes ranging in length from 199 cm to 202 cm will be accepted, others will be rejected.

With this changed requirement, which production process (out of the 3) will result in the smallest percentage of rejections?
c) Seattle-Pipes earns a revenue of $200 for every pipe that gets accepted and loses all money for any pipe that is rejected. The cost of producing the pipes is $140 per pipe ifproduction process “A” is used, $160 per pipe if production process “B” is used, and $177 per pipe if production process “C” is used.

Given this information, which production process would you recommend to maximize profits (revenue minus cost) if the requirement of the utility company is that pipes need to be of 200 cm (or more) and any pipe shorter than 200 cm is rejected?

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Expert Solution

I am sorry..as the images are not uploaded in order.

orchestra answered 1 year ago

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