Problem 4: The Loebuck Grocery must decide how many cases of milk to stock each week in order to meet demand. The probability distribution of demand during a week is shown in the following table. Each case costs the grocer $10 and sells for $12. Unsold cases are sold to a local farmer (who mixes the milk with feed for livestock) for $2 per case. If there is a shortage, the grocer considers the cost of customer ill will and lost profit to be $4 per case. The grocer must decide how many cases of milk to order each week. Demand (cases) Probability 15 .20 16 .25 17 .40 18 .15 1.00 a. Construct the payoff able for this decision situation.
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- If a case is sold, the grocer makes a profit of $2 ($12 selling price - $10 cost). - If a case is not sold and is instead sold to the farmer, the grocer loses $8 ($10 cost - $2 selling price to the farmer). - If a case is not stocked and a customer wants it, Show moreā¦
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Cik Suriani, the manager of a grocery store, orders milk from a dairy on a weekly basis. In her store, she has observed the following probability distribution for demand: Demand (cases)/week Probability 18 19 20 21 22 0.17 0.18 0.30 0.20 0.15 One milk case costs the grocery RM 8 and the selling price is RM 15 per case. The holding cost is RM 0.50/case and the shortage cost is RM 1.00 per case. Simulate the business for 10 weeks. Use a weekly order size of 20 cases of milk and compute the average weekly profit for this order size. (For simulation purposes, use the random numbers: 59, 58, 52, 90, 30, 81, 69, 90, 45, and 50)
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