Sally’s Silk Screening produces specialty T-shirts that are primarily sold at special events. She is trying to decide how many to produce for an upcoming event. During the event, Sally can sell T-shirts for $20 apiece.

However, when the event ends, any unsold T-shirts are sold for $4 each. It costs Sally $8 to make a specialty T-shirt. Sally’s estimate of demand is the following:

Demand Probability 300 .05 400 .10 500 .40 600 .30 700 .10 800 .05

a. What is the service rate (or optimal fractile)?

b. How many T-shirts should she produce for the upcoming event?

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