Question
please show me steps to help me solve this problem. these are the correct answers. I just do not know how they came up with them. thank you
Review: Decision Analysis Exercises Ashley Borden 10/13/15 8:25 A The University of Miami bookstore stocks textbooks in preparation for sales a text are needed. Preregistration shows 80 operations management evidence. Vaidy beheves that the distribution of sales may range from 60 to 80 units, according to the followine probablty each semester. It normally rebes on departmental forecasts and preregistration records to determine how students enrolled, but bookstore manager Vaidy Jayaraman has second thoughts, based on his intution and some historical al forecasts and preregistration records to determine how many copies Vaidy Jayaranan has second thoughts, based on his intsition and some histarical Demand Pro 70 0.30 75 0.15 0.20 0.25 0.10 This textbook costs the bookstore $75 and sells for $125. Any unsold For the bookstore, the profit per sold copy 50 Dollars For the bookstore, the loss per umsold copy 30 Dollars Based on the given information, Vaidy's conditional profits table for the bookstore is store $75 and sells for $125. Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refind of s4s 60 65 70 75 80 Stock 60 65 70 75 p=0.25 p-0.30 p 0.15 p-0.10 $3,000 $3,000 $3,000 $3,000 $3,000 $2,850 $3250 3,250 $3,250 $3250 $2,700 $3,100 $3,500 $3,00 3,500 $2,550-$2950, 33,350-s3,750 s3750 Question is complete. Move y your pointer over or tap on the red indicators to see incorrect answers s complete. Move your pointer over or tap on the red indicators to see i All parts showing da
Explanation / Answer
Profit per sold copy = $125 - $75 = $50
Loss per unsold copy = $75 - $45 = $30
When the stock is 60 and demand is 60 , 65 , 70, 75, 80. In each case Mutiply stock 60 with profit 50. Therefore payoff is $3000 in each case.
When the stock is 65 and demand is 60 , 65 , 70, 75, 80. In each case Mutiply stock 65 with profit $50 except when demand is 60. 5 books are unsold . Therefore multiply 5 books with Loss per unsold copy ($30). Subtract the loss from total profit. For demand 65, 70, 75, 80 the payoff is $3250. But for demand 60, total profit is $3000 as they sell only 60 units and 5 unit remain unsold therefore loss is $150. The payoff is given by ($3000 - $150) = $2850
Similarly calculate loss in each case where Stock is more than the demand.
After calculating payoff matrix, multiply it with probability ansd find the maximum value among different stock.
