The national sales manager for \"I colored this\" (ICT) T-shirts provides all sa
ID: 3326620 • Letter: T
Question
The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the following opportunity loss table showing the potential lost profit for each purchase decision or act from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.
OPPORTUNITY LOSS TABLE
Future Demands
1
2
3
4
Probabilities of demands
0.2
0.4
0.3
0.1
Purchase Quantities
1
0
120
240
360
2
120
0
120
240
3
240
120
0
120
4
360
240
120
0
How many dozen T-shirts should you purchase based on minimizing the expected opportunity loss?
Multiple Choice
Top of Form
1
2
3
4
Bottom of Form
OPPORTUNITY LOSS TABLE
Future Demands
1
2
3
4
Probabilities of demands
0.2
0.4
0.3
0.1
Explanation / Answer
Expected opportunity loss on purchasing 1 dozen
= 0.2 * 0 + 0.4 * 120 + 0.3 * 240 + 0.1 * 360
= 156
Expected opportunity loss on purchasing 2 dozen
= 0.2 * 120 + 0.4 * 0 + 0.3 * 120 + 0.1 * 240
= 84
Expected opportunity loss on purchasing 3 dozen
= 0.2 * 240 + 0.4 * 120 + 0.3 * 0 + 0.1 * 120
= 108
Expected opportunity loss on purchasing 4 dozen
= 0.2 * 360 + 0.4 * 240 + 0.3 * 120 + 0.1 * 0
= 204
Hence, based on minimizing the expected opportunity loss,
Should purchase 2 dozen T shirts.