Arrowmark Vending(Case 5.2)

Arrowmark Vending has the contract to supply pizzaatall home football games for a university in the Big12athletic conference. It is a constant challenge ateachgame to determine how many pizzas to have availableat the games. Tom Kealey, operations manager forArrowmark, has determined that his fixed cost of providing pizzas, whether he sells 1 pizza or 4,000pizzas, is $1,000. This cost includes hiring employeesto work at the concession booths, hiring extraemployees to cook the pizzas the day of the game,delivering them to the game, and advertising duringthe game. He believes that this cost should be equallyallocated between two types of pizzas. Tom hasdetermined that he will supply only two types ofpizzas: plain cheese and pepperoni and cheesecombo. His cost to make a plain cheese pizza is $4.50each, and his cost to make pepperoni and cheesecombo is $5.00 each. Both pizzas will sell for $9.00 atthe game. Unsold pizzas have no value and aredonated to a local shelter for the homeless. Pastexperience has shown the following demanddistributions for the two types of pizza at home game

Required Tasks:

1.For each type of pizza, determine the profit (orloss) associ-ated with producing at each possibledemand level. For instance, determine the profit if200 plain cheese pizzas are produced and 200 are demanded. What is the profit if 200 plain cheese pizzas are produced but 300 were demanded, and so on?

2.Compute the expected profit associated with each possible production level (assuming Tom will only produce at one of the possible demand levels) for each type of pizza.

3 write a short report that provides Tom with the information regarding how many of each type of pizza he should produce if he wants to achieve the highest expected profit from pizza sales at the game