The estimated capacity cushion for ABC Cement Corporation, assuming the highest demand is 500,000 tons, is 200,000 tons, which is the difference between the total capacity of 700,000 tons and the maximum potential demand.
The question involves calculating the estimated capacity cushion for the ABC Cement Corporation. The capacity cushion is defined as the amount of production capacity available beyond the expected demand. It's essentially a buffer against uncertainty, spikes in demand, or production mishaps. Given that the ABC Cement Corporation has a total capacity of 700,000 tons and the potential demands are 500,000 tons with a 30% probability and 300,000 tons with another 30% probability (with an unspecified potential demand with a 0.4 probability), we can simply subtract the highest potential demand from the total capacity to calculate the cushion.
To calculate this, we take the maximum potential demand which is 500,000 tons and subtract it from the total capacity of 700,000 tons, which results in a capacity cushion of 200,000 tons. However, since there is an unspecified potential demand in the question, the precise calculation may vary if that demand is higher than the given potentials.
The complete question is:
The ABC Cement Corporation produces a high-quality cement that is supplied to construction companies. The potential demand and the probability of each potential demand quantity are given for the upcoming year Demand in Tons Probability 500,000 0.3 250,.00004 300,000 0.3 Assuming g capacity of 700,000 tons, calculate the estimated capacity cushion.