Blossom's Flowers purchases roses for sale for Valentine's Day. The roses are purchased for $10 a dozen and are sold for $20 a dozen. Any roses not sold on Valentine's Day can be sold for $5 per dozen. The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100, 200, or 400 dozen roses. Given 0.2, 0.4, and 0.4 are the probabilities for the sale of 100, 200, or 400 dozen roses, respectively, what is the EOL for buying 200 dozen roses?

Question

Quizplus · Accepted Answer

The Expected Opportunity Loss (EOL) for buying 200 dozen roses is calculated by considering the probabilities and the losses for each scenario. If 100 dozen are sold, the loss is (200-100) * ($10 - $5) = $500. If 200 dozen are sold, the loss is $0. If 400 dozen are sold, the loss is (400-200) * ($20 - $10) = $0. The EOL is 0.2 * $500 + 0.4 * $0 + 0.4 * $0 = $100.

Blossom's Flowers Purchases Roses for Sale for Valentine's Day