Problem:
It normally relies on departmental forecast and preregistration records to determine how many copies of a text are needed. Preregistration show 90 operations management students enrolled, but bookstore manager Curtis Ketterman has second thoughts,based on his intuition and some historical evidence. Curtis believes that the distribution of sales may range from 70 to 90 units, according to the following probability model.
Demand 70 75 80 85 90
Probability .15 .30 .30 .20 .05
This textbook costs the bookstore $82 and sells for $112. Any unsole copies can be returned to the publisher, less a restocking fee and shipping for not a net refund of $ 36.
Required:
Question 1) Construct the table of conditional profits
Question 2) How many copies should the bookstore stock to achieve highest expected value? Solve the problem and show all work.