The campus bookstore sells highlighters that it purchases by the case Cost per case including shipping and handling is 200 Revenue per case is 350 Any cases unsold will be discounted and sold at 175 The bookstore has estimated that demand will follow the pattern below:

a. Construct the bookstore's payoff table.:

b. Based on EMV, how many cases should the bookstore stock in order to maximize profit?

c) What would the bookstore’s manager be willing to pay for a forecast that would accurately determine the level of demand in the future?

d) How would your answer differ if the clearance price were not $175 per case but $225 per case? (Hint: It is not necessary to re-solve the problem to answer this.)

Transcribed Image Text:

Demand level Probability 12 cases 20 percent 13 cases 20 percent 14 cases 40 percent 15 cases 15 percent 16 cases 5 percent Demand level Probability 12 cases 20 percent 13 cases 20 percent 14 cases 40 percent 15 cases 15 percent 16 cases 5 percent

Answer rating: 100% (QA)

a The bookstores payoff table Demand Level cases 10 11 12 13 14 Probability 20 20 40 15 5 Stock case... View the full answer