A firm sells five types of women’s parkas. Some data follow.

Parka	Price	Cost	Salvage	µ	σ	NV Q	NV EP
A	$220	167.2	132	1,100	300	1,176	$47,949
B	205	155.8	127.1	2,000	800	2,269	74,992
C	190	144.4	121.6	3,000	1,500	3,646	99,815
D	175	133	115.5	2,000	1,200	2,650	59,786
E	160	121.6	108.8	1,000	700	1,472	27,011

The firm will produce some of the parkas well in advance of the selling season. The other parkas are produced after a trade show that occurs shortly before the season starts. After attending the trade show, the firm will basically know the demand for each parka. Unfortunately the firm’s production capacity is limited after the trade show, so the firm wants to produce at least 5,000 parkas before the show. Also, each parka should be produced entirely either before or after the show……they don’t split production.

1. Before answering the real question above, what would be the firm’s total expected profit if every parka model was produced before the trade show?
2. Before answering the real question above, what would be the firm’s total expected profit if every parka was produced after the trade show?
3. What quantity of each parka model should be produced before the trade show to try to maximize expected profits (some will be '0')?
4. What is the expected total number of parkas the firm will produce after the trade show?
5. What is the firm’s expected profit based on the decisions in c) and d)?

Answer rating: 100% (QA)

To determine the firms total expected profit in different scenarios we need to calculate the expecte... View the full answer