The annualized cost of acquiring capacity for the new barracudadrives at Seagate is calculated as $25 per unit and the contibutionmargin for the product is $45 per unit.
a.) what service level(percentile of demand met) should seagatetarget for in building capacity? how much capacity will it build?the demand forcast for the barracuda drives is uniform between 100and 200.
b.) how does this service level change, if Seagate outsourcesmanufacturing to china, to arrive at an annualized cost of capacityof $10 per unit? How much capacity will it build?
c.) How does this service level change if the inbound shipmentcost per unit from China to US reduces the margin per unit to $35?How much capacity will it build?
d.) Conduct the capacity calculations in all 3 scenarios abovewhen the forcast for the barracuda drives is expected to follow thefollowing distributions.
| demandwill be less than | Probability | Cumulative Probability |
| 100 | 0.1 | 0.1 |
| 120 | 0.2 | 0.3 |
| 140 | 0.3 | 0.6 |
| 160 | 0.1 | 0.7 |
| 180 | 0.15 | 0.85 |
| 200 | 0.15 | 1 |
