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Question
The campus bookstore sells highlighters that it purchases by the case. Cost per case, including shipping and handling, is $200. Revenue per case is $350. Any cases unsold will be discounted and sold at $175. The bookstore has estimated that demand will follow the pattern below
| Demand level | Probability |
| 10 cases | 20 percent |
| 11 cases | 20 percent |
| 12 cases | 40 percent |
| 13 cases | 15 percent |
| 14 cases | 5 percent |
a. Construct the bookstore's payoff table.
b. How many cases should the bookstore stock in order to maximize profit?
c. How would your answer differ if the clearance price were not $175 per case but $225 per case? (It is not necessary to re-solve the problem to answer this.)
Answer
This answer is hidden. It contains 417 characters.
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