The Gilber Air Conditioning Company is considering purchase of a special shipment of portable air conditioners from Japan. Each unit will cost Gilbert $80 and be sold for $125. Gilbert does not want to carry over surplus air conditioners to the following year. Thus, all surplus units will be sold to a wholesaler who has agreed to take them for $50 per unit. Given the probability distribution for air conditioners shown below, recommend order quantity and the expected profit using critical fractile approach:
|
Demand
|
Estimated Probability
|
|
0
|
0.30
|
|
1
|
0.35
|
|
2
|
0.20
|
|
3
|
0.10
|
|
4
|
0.05
|