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It is March, and the annual NCAA Basketball Tournament is down to the final four teams. Randy is a T - shirt vendor who plans
It is March, and the annual NCAA Basketball Tournament is down to the final four teams. Randy is a Tshirt vendor who plans to order Tshirts with the names of the final four teams from a manufacturer and sell them to the fans.
The fixed cost of any order is $ the variable cost per shirt to Randy is $ and Randys selling price is $ However, this price will be charged only until a week after the tournament. After that time, Randy figures that interest in the Tshirts will be low, so he plans to sell all remaining Tshirts, if any, at $ each.
His best guess is that demand for the Tshirts during the fullprice period will be He's thinking about ordering Tshirts, but he wants to build a spreadsheet model that will let him experiment with the uncertain demand and his order quantity. How should he proceed? Change the discount price to $ What is the profit when the order value equals the demand Now try changing the order value to a number higher than the demand. Do this several times and observe the value for profit. What happens to the profit with order values higher than demand? Does this make sense? Why or why not?
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