The Great Western University bookstore buys textbooks two months prior to the beginning of each semester. The store manager, Heidi Strong, uses departmental data and past student registration records to determine the number of textbooks to order from publishers. Pre-registration records show that currently 100 students are enrolled in various sections of a required introductory supply chain management course. Historically, however, there has been a considerable amount of variability in these enrollment numbers. Heidi, based on her experience, has determined the probabilities of selling the following number of textbooks for the course.

Table F.20

The bookstore purchases this book for $100 a copy and sells it the students for a price of $140. The publisher will buy back any unsold textbooks and, after deducting restocking and shipping costs, provide the bookstore a refund of $45 per textbook:

1. Construct a payoff matrix for Heidi.

2. To achieve the highest EV, how many copies of the textbook should Heidi initially order from the publisher?

Transcribed Image Text:

Number of units 80 100 110 120 90 0.20 0.10 0.25 Probability 0.30 0.15