The probability that actual supply chain demand exceeds average demand is estimated to be 5 percent of the year (365 days) or 18.25 summer days.What total costs are associated with Cnp,when it is determined that the loss of goodwill in the community averages $30,000 per incident? The events provoking such costs include brownouts,power failures,etc.

Question

Quizplus · Accepted Answer

Firstly, we need to calculate the expected number of incidents per year, which can be found by taking 5% of 365 days = 18.25 days rounded to 18 days.

Next, we can calculate the total cost associated with Cnp for these incidents by multiplying the expected number of incidents (18) with the cost per incident ($30,000), which gives a total of $540,000.

However, it is stated that the probability of such an incident occurring during summer days is 18.25/365 = 5%. Therefore, we only need to consider the costs for these summer incidents, which would be 5% of $540,000 = $27,000.

Finally, we need to add the cost of Cnp itself, which is given as $547,500.

Therefore, the total costs associated with Cnp would be $547,500 + $27,000 = $574,500, which is closest to option B.

The Probability That Actual Supply Chain Demand Exceeds Average Demand