Scenario 16.3 - AITP's Revenge
The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4.
-The components needed to produce a computer clock cost twenty-five cents.What is the expected profit if the AITP club sponsor produces the optimal number of clocks?
A)$263.72
B)$262.54
C)$260.97
D)$269.41

Question

Quizplus · Accepted Answer

We can begin by finding the optimal number of clocks to produce in each month using the demand equations provided. We can maximize profit by producing and selling as many clocks as possible in the months with higher demand and fewer clocks in the months with lower demand.

Month 1: Maximize 0.25(20-p1) -> p1 = 12. 
Month 2: Maximize 0.25(20-1.4p2) -> p2 = 7. 
Month 3: Maximize 0.25(20-1.8p3) -> p3 = 4. 
Month 4: Maximize 0.25(20-2.2p4) -> p4 = 2.

The optimal strategy is to produce and sell 12 clocks in the first month, 7 clocks in the second month, 4 clocks in the third month, and 2 clocks in the fourth month. This results in a profit of:

12 * (20 - 0.25*12) + 7 * (20 - 1.4*7) + 4 * (20 - 1.8*4) + 2 * (20 - 2.2*2) = $262.54

Therefore, the best choice is B, with an expected profit of $262.54.