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Operations Management (11th Edition)

Chapter C, Problem 14P Bookmark Show all steps: ON
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Step 1 of 4

Enter the ‘per-unit profit’ realized if an item is sold in season, and the ‘per-unit loss’ realized if the Continue to post
item is sold after the season (enter both amounts as positive numbers) as shown below: 20 questions remaining

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Step 2 of 4 Add a Add a

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Operations
Enter the possible demands along with the probability of each occurring as shown below: Management
11th Edition

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Step 3 of 4
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UPTTI 322

Set up a table where the demands appear along the top row and the same values are used as
possible order quantities down the left column. Find me a tutor
Fill in the table according to this rule:

Wherever quantity is less than or equal to the demand, the payoff is the profit (above) times the
quantity; otherwise, the payoff is the profit per unit times the demand minus the loss.

The loss is calculated as (quantity minus demand) times loss per unit as shown below:

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Step 4 of 4

To find the best order quantity, multiply each value from the first row of the payoff table by the
corresponding value from the row of probabilities, add these up, and enter the result in the first
row of the table below.

Repeat for the remaining rows of the payoff table. The appropriate order quantity is the one next
to the highest expected payoff.

Thus, the order quantity is 2,000 .

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Recommended solutions for you in Chapter C

Chapter C, Solution 8P Chapter C, Solution 7P

The information given in the problem is as follows: The information regarding the order quantity and
Order Quantity Price Per Unit 0-11 $520 12-143 their respective price per unit is as shown below in
$500 144 or more $400 Annual Demand (D) 1200 the table.
Ordering Cost (Co) $300 Holding Cost...
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