Hi,

I am having difficulty setting up my binomial distribution for the following problem:

A company creates video presentations for its "customers". It generates promo videos based on what it finds on a company's website and then sends a low resolution sample to the customer. If the customer likes what it sees, then the customer pays IDEAX $1900 for the video and some additional production follow up work. Customers buy the video with probability 0.054.

IDEAX estimates the cost of making each video at $50. If a customer buys a video, the additional cost to IDEAX for post-production is $500 for each video for the first 20 videos purchased. If more than 20 videos are bought, the post-production cost for the 21st video and beyond is $1000. (Example: If IDEAX makes 200 videos, it incurs a cost of 200*$50=$10000 plus post-production costs. If 10 videos are bought, post-production costs are 10*$500=$5000 but if 30 videos are bought, post production costs are 20*$500+10*$1000= $20000). NOTE: The promo video cost of $50 is based on the number of promo videos created, but the post-production costs are based on the number of videos purchased.

I am expected to build an Excel "Data Table" to determine the number of videos IDEAX should make and send to customers so that expected profit is maximized. Expected revenue is based on the $1900 revenue per video and the 0.054 probability of actually having a customer buy a video. Cost is based on the number of videos IDEAS creates.

Any insight you could offer related to the proper binomial distribution would be appreciated.