2. The proprietor of a food stall has introduced a new item of food. The cost...

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2. The proprietor of a food stall has introduced a new item of food. The cost of making it is $1 per piece, and because of its novelty it could be sold for $3 per piece. It is, however, perishable and pieces remaining unsold at the end of a day are a dead loss. He expects the demand to be variable and has drawn up the following probability distribution expressing his estimates. 150 Number of pieces demand 100 110 120 130 140 Probability 0.07 0.10 0.23 0.38 0.12 0.10 (a) Calculate the expected profit or loss if he manufactures 120 pieces. (b) Is is better to make 120 pieces or 130 pieces? Justify your answer. (Hint: Consider the risk as well.) 2. The proprietor of a food stall has introduced a new item of food. The cost of making it is $1 per piece, and because of its novelty it could be sold for $3 per piece. It is, however, perishable and pieces remaining unsold at the end of a day are a dead loss. He expects the demand to be variable and has drawn up the following probability distribution expressing his estimates. 150 Number of pieces demand 100 110 120 130 140 Probability 0.07 0.10 0.23 0.38 0.12 0.10 (a) Calculate the expected profit or loss if he manufactures 120 pieces. (b) Is is better to make 120 pieces or 130 pieces? Justify your answer. (Hint: Consider the risk as well.)

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We are asked to calculate the expected profit or loss if the proprietor manufactures 120 pieces and ... View the full answer