Question
Surfs Up designed a new, lighter surfboard that they plan to sell in the US. The marketing team estimates that the minimum demand will be
Surfs Up designed a new, lighter surfboard that they plan to sell in the US. The marketing team estimates that the minimum demand will be 5,000 for the new surf boards, but the most likely demand will be 9,500, and the maximum demand might be as high as 16,000. Boards cost $400 to make and will sell for $600. Any unsold units can be sold for a sale price of $300 per unit. The overseas competitor Waves claims they will also sell similar lightweight surfboard, but Surfs Up estimates there is only a 30% chance that Waves will actually make it to market. However, if Waves does make it to market then they will capture half of the market (half of the actual demand), leaving only half of the demand for Surfs Up. Use the given shell file and be sure to fill in the empty blue cells before getting started. a. How many surfboards should Surfs Up produce to maximize profit in the long run? Try values 6,000, 8,000, 10,000, 12,000, 14,000 and 16,000. b. What is the expected profit of this order quantity?
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