The owner of Kenton Clothiers must decide on the number of men's shirts to order for the coming season. One order must be placed for the entire season. The normal sales price is $30 per shirt; however, unsold shirts at season's end must be sold at half price. The following data are available:

Over the past 25 seasons, Kenton Clothiers has experienced the following sales volume:

The historical sales have occurred at random; that is, they have exhibited no cycles or trends, and the future is expected to be similar to the past.
Required:
(1) Prepare a payoff table representing the expected contribution margin of each of the four possible strategies of ordering 100, 200, 300, or 400 shirts, assuming that only the four quantities listed are ever sold.
(2) Select the best of the four strategies in requirement 1, based on the expected contribution margin and compute the coefficient of variation for this strategy.
(3) Compute the expected value of perfect information in this problem.

Transcribed Image Text:

Unit Contribution Margin at Unit Loss at $15 Unit $23 21 Order Unit Quantity Sales Price Cost Regular Price Half Price $8 $ 7 100 200 300 400 $30 30 30 30 20 10 Quantity Frequency