A job shop receives the order for high precision formed parts. The cost of the producing each part is just about $20,000. The customer requires that either 4 or 5 good parts be supplied. Each and every good part sold will yield $30,000. However, if fewer than four good parts are manufactured, none will be purchased. The probability of the individual part being acceptable to the customer is .80.
1. Find out the optimum batch production quantity given which the job shop has agreed to supply the formed parts.
2. Is the condition a profitable one for job shop?
3. If not, how should the selling price be changed for expected profit to be positive?