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7) 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

7) 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

Demand level

Probability

10 cases

20 percent

11 cases

20 percent

12 cases

40 percent

13 cases

15 percent

14 cases

5 percent

a. Construct the bookstore's payoff table.

b. How many cases should the bookstore stock in order to maximize expected profit?

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

Apr 03 2021 View more View Less

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