The campus bookstore sells highlighters that it purchases by the case. Cost per case, including shipping and handling, is $200. Revenue per case is $350. Any cases unsold will be discounted and sold at $175. The bookstore has estimated that demand will follow the pattern below
(a) Construct the bookstore's payoff table.
(b) How many cases should the bookstore stock in order to maximize expected profit?
(c) How would your answer differ if the clearance price were not $175 per case but $225 per case? (It is not necessary to re-solve the problem to answer this.)

Question

The campus bookstore sells highlighters that it purchases by the case. Cost per case, including shipping and handling, is $200. Revenue per case is $350. Any cases unsold will be discounted and sold at $175. The bookstore has estimated that demand will follow the pattern below
  (a) Construct the bookstore's payoff table.
(b) How many cases should the bookstore stock in order to maximize expected profit?
(c) How would your answer differ if the clearance price were not $175 per case but $225 per case? (It is not necessary to re-solve the problem to answer this.)

Quizplus · Accepted Answer

The Answer of The campus bookstore sells highlighters that it purchases by the case. Cost per case, including shipping and handling, is $200. Revenue per case is $350. Any cases unsold will be discounted and sold at $175. The bookstore has estimated that demand will follow the pattern below
  (a) Construct the bookstore's payoff table.
(b) How many cases should the bookstore stock in order to maximize expected profit?
(c) How would your answer differ if the clearance price were not $175 per case but $225 per case? (It is not necessary to re-solve the problem to answer this.)

The Campus Bookstore Sells Highlighters That It Purchases by the Case