Demand or SN (thousands) where: $100 200 250 300 400 Frequency V/10 //10 The firm's estimates...

Transcribed Image Text:

Demand or SN (thousands) where: $100 200 250 300 400 Frequency V/10 //10 The firm's estimates of long and short costs are: 4/10 V/10 //10 P(SN) 1 .2 .3 3 SC = $1,000+ 8X LC $500 + 1.0Y SC total period short costs LC total period long costs X = total number of units (thousands of dollars) short during the period Y = total number of units (thousands of dollars) long during the period How much cash should the bank keep on hand for the next period to minimize total expected long and short costs? Demand or SN (thousands) where: $100 200 250 300 400 Frequency V/10 //10 The firm's estimates of long and short costs are: 4/10 V/10 //10 P(SN) 1 .2 .3 3 SC = $1,000+ 8X LC $500 + 1.0Y SC total period short costs LC total period long costs X = total number of units (thousands of dollars) short during the period Y = total number of units (thousands of dollars) long during the period How much cash should the bank keep on hand for the next period to minimize total expected long and short costs?

Answer rating: 100% (QA)

The bank should keep the amount of cash that is equal to the sum of the expected long and short costs for the next period This amount can be calculated by summing the short cost ... View the full answer