# Question

Leonard Presby’s newsstand uses naive forecasting to order tomorrow’s papers. The number of newspapers ordered corresponds to the previous day’s demands. Today’s demand for papers was 22. Presby buys the newspapers for $.20 and sells them for $.50. Whenever there is unsatisfied demand, Presby estimates the lost goodwill cost at $.10. Complete the accompanying table, and answer the questions that follow.

Demand Probability

21 ........... .25

22 ........... .15

23 ........... .10

24 ........... .20

25 ........... .30

(a) What is the demand on day 3?

(b) What is the total net profit at the end of the 6 days?

(c) What is the lost goodwill on day 6?

(d) What is the net profit on day 2?

(e) How many papers has Presby ordered for day5?

Demand Probability

21 ........... .25

22 ........... .15

23 ........... .10

24 ........... .20

25 ........... .30

(a) What is the demand on day 3?

(b) What is the total net profit at the end of the 6 days?

(c) What is the lost goodwill on day 6?

(d) What is the net profit on day 2?

(e) How many papers has Presby ordered for day5?

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