A retailer is deciding how many of a certain product to stock. The historical probability distribution...
A retailer is deciding how many of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $8 per unit and sells for $25 per unit. The largest profit in the entire payoff table for this scenario is
a. $8 profit
b. $75 profit
c. $17 profit
d, $51 profit
e. $24 profit
Homework Answers
Answer: Option D
Explanation: The maximum sales will correspond to the maximum profit.
Sales (Max) = 3 units
Cost price = $8
Total cost = 8 x 3 = $24
Selling price = $25
Total Revenue = 3 x 25 = $75
Profit = Total Revenue - Total cost
= 75 - 24
= $51
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A retailer is deciding how many of a certain product to stock.
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