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(Solution) - Wurst Inc operates the concession stands at the State College

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Wurst Inc. operates the concession stands at the State College football stadium. State College has had successful football teams for many years and, as a result, the stadium is virtually always filled. From time to time the company has found its supply of hot dogs inadequate, while at other times there has been a surplus. A review of sales records for the past 10 seasons reveals the following frequency of hot dogs sold:
Quantity of Hot Dogs Sold Number of Games
10,000 ............................................ 5
20,000 ............................................ 10
30,000 ............................................ 20
40,000 ............................................ 15
Total ............................................ 50
Hot dogs that sell for $.50 each cost $.30 each. Unsold hot dogs are donated to the local orphanage.
Required:
(1) Prepare a payoff table depicting the expected value of each of the four possible strategies of ordering 10,000, 20,000, 30,000, or 40,000 hot dogs, assuming that the four quantities listed were the only quantities ever sold and that the occurrences were random events.
(2) Compute the dollar value of knowing in advance what the sales level would be at each game (that is, the expected value of perfect information).

 







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This question was answered on: Jul 11, 2017

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