Module A: Decision$-$Making Tools $($Part Four: Business Analytics Modules$)$

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Module A: Decision$-$Making Tools $($Part Four: Business Analytics Modules$)$

Which decision alternative maximizes the expected value of the payoff? $[$PX$]$

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Which decision alternative maximizes the expected value of the payoff? $[$PX$]$

$..$ A$.11$ The University of Miami bookstore stocks textbooks in preparation for sales each semester. It normally relies on departmental forecasts and preregistration records to determine how many copies of a text are needed. Preregistration shows $90$ operations management students enrolled, but bookstore manager Vaidy Jayaraman has second thoughts, based on his intuition and some historical evidence. Vaidy believes that the d$$stribution of sales may range from $70$ to $90$ units, according to the following probability model:

$\backslash$table$[[$Demand$,70,75,80,85,90],[$Probability$,\mathrm{.}15,\mathrm{.}30,\mathrm{.}30,\mathrm{.}20,\mathrm{.}05]]$

This textbook costs the bookstore $$82$ and sells for $$112.$ Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refund of $$36.$