problem 1: Wingman Distributing Company is expanding its supply chain to comprise a new distribution hub in South Bend. The key decision includes the number of trucks for the facility. The particular model of truck Wingman is considering can be used 8,000 miles a month and will cost $1500 a month in capital costs. Additionally, each mile a truck is used costs $0.90 for maintenance. A local truck rental firm will rent trucks at a cost of $1.40 per mile. Given the distribution of likely requirements for trucks, management has come up with three alternatives or options to consider as shown in the table below:
Monthly Requirements (miles) 40,000 80,000 120,000
Probability 0.30 0.40 0.30
Fleet Size (trucks) 5 10 15
Which fleet size will yield the lowest expected monthly costs for the Wingman?