(a) If the company bases monthly orders on the expected value of the monthly demand, what should Carolina's monthly order quantity be for this product? (b) Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or lose in a month (in dollars) if it places an order based on your answer to part (a) and the actual demand for the item is 300 units

(a) If the company bases monthly orders on the expected value of the monthly demand, what should Carolina's monthly order quantity be for this product? (b) Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or lose in a month (in dollars) if it places an order based on your answer to part (a) and the actual demand for the item is 300 units

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The demand for a product of Carolina Industries varies greatly from month to month. The probability distribution in the following table, based on the past two years of data,
shows the company's monthly demand.
Unit Demand Probability
300
400
500
600
0.20
0.30
0.35
0.15
(a) If the company bases monthly orders on the expected value of the monthly demand, what should Carolina's monthly order quantity be for this product?
(b) Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or lose in a month (indoitars) if it
places an order based on your answer to part (a) and the actual demand for the item is 300 units?

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