George T-Shirts Essay

839 Words4 Pages
Question 1: What are the possible financial outcomes if George orders 5,000 shirts, 7,500 shirts and 10,000 shirts, respectively?

Based on the information given in the case, the expected number of attendees is:
E(x) = 80,000*0.25 + 50,000*0.5 + 20,000*0.25 = 50,000 people
Selling price per shirt: $100/12 = $8.33
Discount price: $1.5
Scenario 1:
Assumption: George orders 5000 T-shirts; cost: $17,750; the number of attendees buy his T-shirts are 5%, 10% and 15% respectively
The possible financial outcomes under scenario 1 are as follows:

Scenario 2:
Assumption: George orders 7,500 T-shirts; cost = $25,250; the number of attendees buy his T-shirts are 5%, 10% and 15% respectively
The possible financial outcomes under
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How much is perfect information worth to him?
George would use the information to maximize his profit. In question 1, George did not have perfect information about the future, therefore his best bet was to take the conservative route based on assumptions, and estimations. For instance, the profit he made based on the assumption in scenario 1 (50,000 people would come, 10% will buy his T-shirt) is $23,900. If he had perfect information, say he knew that the number of attendees would be 80,000 and 10% of them would buy a shirt from him, he would place an order of exactly 8000 T-shirts.
Assumption: He pays $5 for one extra T-shirt in excess of 7,500 pcs. * Cost = $25,250 + 500*$5 = $27,750 * Revenue = 8,000*8.33 = $66,640 * Profit = $66,640 - $27,750 = $38,890
Perfect information is worth: $38,890 - $23,917 = $14,973

Question 4: Assume George makes T-shirts for 30 events per year:
Should George quit his day job and become a T-shirt entrepreneur full time?

I will need the following information to address this question. 1) How much is his income at his current job? 2) Is the income from making T-shirts more or less substantial than his current job? 3) Based on the question he potentially has an event every 12 days. How big are these events? Are they all as lucrative as the current event? 4) What is the competitive landscape? Is he the only special events T-shirt maker? If not, how competitive is it? 5) Are there any potential changes

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