California pins commemorating the 2015 Soccer Championship game are purchased in

Question

California pins commemorating the 2015 Soccer Championship game are purchased in multiples of 50 for your college organization at $1.75 each. When sold during the event the selling price is $9.00. After the event their salvage value is just $1.00.

            From past events, you calculate the probability of selling different quantities of pins within a range from 50 to 250:

Customer Demand                  50       100      150     200     250    

Prob. Of Occurrence               .10       .28       .25      .30      .07

How many pins should you buy and have on hand for the event? (Use excel and show your formulas with Ctrl ~)

Does the decision change if you exchange the probabilities for 100 and 250? If so, what is the change? (Show your excel sheet with the change made; no need for Ctrl~ on b only).

Make sure you answer the question asked and not just show your spreadsheet. PLEASE USE EXCEL!!!!!

Explanation / Answer

Using News Vendor Model Cost Price 1.75 Selling Price 9 Salvage Value 1 5 28 37.5 60 17.5 Demand 50 100 150 200 250 148 AveragDemand Prob of Occurance 0.1 0.28 0.25 0.3 0.07 21 SD Cumulative Prob 0.1 0.38 0.63 0.93 1 Prob that deman will be greater than expected qualntity 0.9 0.62 0.37 0.07 0 Co = overage cost Co = Cost – Salvage value 0.75 Cu = underage cost Cu = Price – Cost 7.25 Critical Ratio Cu / (Co + Cu ) 0.90625 175 Qunatity Ordered Based On the CSL (P

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