A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and
20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor. What are the two possible cases for the amount of t-shirts that will be sold to the used clothing vendor? How would you calculate this amount in a spreadsheet model?
The company will either sell no t-shirts to the used clothing vendor (if it produces less than demand) or it will sell a surplus equal to the difference between production and demand (if it produces more than demand). This logic can be implemented in a spreadsheet model using an IF statement.
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