Question

Fruit Company needs to know the pounds of apples to have on hand each day. Each pound of apple costs $0.20 and can be sold for $0.50. Unsold apples are worthless at the end of the day. After studying the last six months sales, Fruit Company estimates the future demand to be 300 pounds 45% of the time and 500 pounds 55% of the time. Required: Determine whether Fruit Company should order 300 or 500 pounds of apples by Prepare a table showing the operating income of each action choice for each possible order level. (Hint: there are total 4 possible operating incomes) b. What is the expected operating income of each order option? a.

Answer 1

go Answers Prepare a table shouding the operating more income Demand Demand Expected value LQuantity andered probability probability 300 500 300 90 90 $90 500 50 150 کھلط ܒܢ us 55%. probability Demand probability, 300 pounds of apples, 90, 0.3 means = 0.50-0.20) 500 pounds dr apples, (300X0.3)-(200x0,2)= 300X0.3 2)=50 500X0.3 = 150 Expected valere) 300 pounds of apples, 90845. +90X5514. = 90

500 pounds of apples, 2 5084547+150% 55%. = 105 r in case D). The Expeeted value is higher 500 pounds of appler, this foruit company should ouder 500 pounds of apples to maximize profit.