Question 1 The Supermarket Store is about to place an order for Halloween candy. One best-selling brand of candy can be purchased at $ 2.50 per box before and up to Halloween. After Halloween, all the remaining candy can be marked down and sold for $ 1.00 per box. Assume that the loss in goodwill cost stemming from customers whose demand is not satisfied is $ 0.35. The store is considering a price per box of $ 4, $ 4.50, $ 5, and $ 5.50. Recognizing that demand is price dependent, through market research the store determines that demand distribution for these prices is as follows.

Demand Distribution when Sales Price = $ 4.00- Demand (boxes) Probability 80 0.05 90 0.1 100 0.15 110 0.2 120 0.2 130 0.15 140 0.1 150 0.05

Demand Distribution when Sales Price = $ 4.50 Demand (boxes) Probability 65 0.05 75 0.1 85 0.15 95 0.2 105 0.2 115 0.1 125 0.1 135 0.1

Demand Distribution when Sales Price = $ 5.00 Demand (boxes) Probability 50 0.05 60 0.1 70 0.15 80 0.2 90 0.2 100 0.05 110 0.1 120 0.15

Demand Distribution when Sales Price = $ 5.50 Demand (boxes) Probability 35 0.05 45 0.1 55 0.15 65 0.2 75 0.15 85 0.15 95 0.1 105 0.1

You are required to assist the store manager in completing the table below.

Sales Price $ 4.00 $ 4.50 $ 5.00 $ 5.50 Fill in the table below for each price

Optimal Stocking Quantity (Q*) in units

Expected Profit ES[(Q*)] in $

Expected Shortage ES(Q*) in units

Based on your results, which is the preferred selling price to:

1. Maximize end-of-season expected profit or ES[(Q*)]; OR

2. Minimize expected shortage or ES(Q*) .