The Varden Packaging Company Has a Contract to Fill 50-Gallon

question 57

True/False

The Varden Packaging Company has a contract to fill 50-gallon barrels with gasoline for use by the U.S. Army. The machine that Varden uses has an adjustable device that allows the average fill per barrel to be adjusted as desired. However, the actual distribution of fill volume from the machine is known to be normally distributed with a standard deviation equal to 0.5 gallons. The contract that Varden has with the military calls for no more than 2 percent of all barrels to contain less than 49.2 gallons of gasoline. In order to meet this requirement, Varden should set the mean fill to approximately 50.225 gallons.

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Definitions:

Merchant

An individual or company engaged in the buying and selling of goods, especially on a large scale or with international trade.

Article 2

Part of the Uniform Commercial Code that governs the sale of goods in the United States.

Good Faith

The honest intent to act without taking an unfair advantage over another party in a contractual or negotiation context.

Unconscionable Clauses

Terms in a contract that are deemed so unfair or oppressive that they are unenforceable under law.