Answered: Chip Bilton sells sweatshirts at State…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Chip Bilton sells sweatshirts at State U football games.
He is equally likely to sell 200 or 400 sweatshirts at each
game. Each time Chip places an order, he pays $500 plus
$5 for each sweatshirt he orders. Each sweatshirt sells for
$8. A holding cost of $2 per shirt (because of the opportunity
cost for capital tied up in sweatshirts as well as storage
costs) is assessed against each shirt left at the end of a
game. Chip can store at most 400 shirts after each game.
Assuming that the number of shirts ordered by Chip must

be a multiple of 100, determine an ordering policy that maximizes expected profits earned during the first three games of the
season. Assume that any leftover sweatshirts have a value of $6.

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