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I am posting the answer to this because chegg does not already have it. The local Office of Tourism sells souvenir calendars. Sue, the head

I am posting the answer to this because chegg does not already have it.

The local Office of Tourism sells souvenir calendars. Sue, the head of the office, needs to order these calendars in advance of the main tourist season. Based on past seasons, Sue has determined the probability of selling different quantities of the calendars for a particular tourist season.

Quantity Probability
75k 0.15
80k 0.25
85k 0.3
90k 0.2
95k 0.1

The Office of Tourism sells the calendars for $12.95 each. The calendars cost Sue $5 each. The salvage value is estimated to be $0.50 per unsold calendar. Determine how many calendars Sue should order to maximize expected profits.

ANSWER:

image text in transcribed Highest expected profit is at Q=85k

Demangd Expected Profit 75000 80000 90000 95000 75000 $596,250.00 $596,250.00 $596,250.00 596,250.00 $596,250.00 S 596,250.00 80000 $573,750.00 636,000.00 $636,000.00 $636,000.00 $636,000.00 $ 85000 $576,250.00 613,500.00 $675,750.00 $675,750.00 $675, 750.00 $ 90000 $578,750.00 $591,000.00 $653,250.00 $715,500.00 $715,500.00 S 95000 $581,250.00 $568500.00 S630,750.00 $693,000.00 $755,250.00 S 626,662.50 645,262.50 645,187.50 632,662.50 Order Amt

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