The Ramshead Pub sells a large quantity of beer every Saturday. From past sales records, the pub has determined the following probabilities for sales: Barrels Probability 6 .10 7 .20 8 .40 9 .25 10 .05 1 .00 Compute the expected number of barrels that will be sold on Saturday.

The Ramshead Pub sells a large quantity of beer every Saturday. From past sales records, the pub has determined the following probabilities for sales: Barrels Probability 6 .10 7 .20 8 .40 9 .25 10 .05 1 .00 Compute the expected number of barrels that will be sold on Saturday.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.3: Single-stage Decision Problems

Problem 5P

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A new edition of a very popular textbook will be published a year from now. The publisher currently has 1000 copies on hand and is deciding whether to do another printing before the new edition comes out. The publisher estimates that demand for the book during the next year is governed by the probability distribution in the file P10_31.xlsx. A production run incurs a fixed cost of 15,000 plus a variable cost of 20 per book printed. Books are sold for 190 per book. Any demand that cannot be met incurs a penalty cost of 30 per book, due to loss of goodwill. Up to 1000 of any leftover books can be sold to Barnes and Noble for 45 per book. The publisher is interested in maximizing expected profit. The following print-run sizes are under consideration: 0 (no production run) to 16,000 in increments of 2000. What decision would you recommend? Use simulation with 1000 replications. For your optimal decision, the publisher can be 90% certain that the actual profit associated with remaining sales of the current edition will be between what two values?
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