Question: Consider the Kilgore Manufacturing case from Assignment 2. Assume that the company bids 620 units using the old manufacturing process (recall that daily production levels follow a normal distribution with a mean of 635 and std. dev of 40).

a) (10 points) Over the next one year, how much can the company expect to pay in terms of penalties, assuming a $5000 penalty for every day they fall short? Assume 300 days of production in a year.

b) (10 points) Over the next 10 days of production, what is the likelihood that they fall short of their bid amount on two or more days? What assumptions are you making in answering this question?

c) (10 points) SJT’Berg Consulting Co. has done prior work on such contracts and has advised Kilgore that future contracts are unlikely to be awarded if Kilgore’s production levels fall below their bid level more than 10% of the time. Considering this, what should be Kilgore’s bid amount?