The campus bookstore sells stadium blankets embroidered with the university crest. The blankets must be purchased in bundles of one dozen each. Each blanket in the bundle costs $65, and will sell for $90
Blankets unsold by homecoming will be clearance priced at $20. The bookstore estimates that demand patterns will follow the table below.
a. Build the decision table.
b. What is the maximum expected monetary value?
c. How many bundles should be purchased?
Demand level Probability
1 bundle 10 percent
2 bundles 30 percent
3 bundles 50 percent
4 bundles 10 percent
(a) See the table below; (b) the maximum expected value is $516; (c) the bookstore should order 2 bundles.
Profit Demand 1 Demand 2 Demand 3 Demand 4 EMV
Probability 0.1 0.3 0.5 0.1
Order 1 300 300 300 300 300
Order 2 -240 600 600 600 Maximum 516
Order 3 -780 60 900 900 480
Order 4 -1320 -480 360 1200 24
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