Question: a manager must decide how many tshirts to stock for...
A manager must decide how many T-Shirts to stock for the upcoming concert. Each T-Shirt costs $7 to order and will sell for $15. Lets assume any leftover T-Shirts can be sold (salvaged) for $2 each. The T-Shirts can only be ordered in lots of 200. The manager predicts that demand for the T-Shirts will likely be low (around 500), will possibly be high (around 750), and that there is a slight chance that demand will be very high (around 1000). Now lets assume that the decision alternatives are to order 400, 600, 800, or 1000 T-Shirts.
a) What respective probabilities would the manager assign to “likely” “possibly” and “slight chance” respectively? The probabilities add up to 100%.
b) Use the probabilities you estimated in part a) to determine the optimal number of T-Shirts to order.
c) Show the Decision Analysis Table.