University of Florida football programs are printed 1 week prior to each home ga

Question

University of Florida football programs are printed 1 week prior to each home game. Attendance averages 75,000 screaming and loyal Gators fans, of whom two-thirds usually buy the program, following a normal distribution, for $5 each. Unsold programs are sent to a recycling center that pays only 10 cents per program. The standard deviation is 10,000 programs, and the cost to print each program is $1. Refer to the standard normal table for z-values a) What is the cost of underestimating demand for each program? Cs (round your response to two decimal places)

Explanation / Answer

Avg demand, m           50,000 Price $           5.00 Salvage cost $           0.10 std dev, s           10,000 cost $           1.00 Cost of underestimating demand, also known as undersage cost , Cs Cs = Price - Cost Cs $       4.00

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