tees r us, which manufactures and sells t-shirts for sporting events, is providi

Question

tees r us, which manufactures and sells t-shirts for sporting events, is providing shirts for an upcoming tournament. each shirt will cost $10 to prpduce and will be sold for $16. any unsold shirts left over at the end of the tournament xan be sold for $5 a piece in the near future. tees R Us assumes the demand for the shirts will be 1000,2000, 3000, or 4000. the company also estimates that the probabilities of each of these sales level occurring will be 15%,25%,30%, and 30%, respectively. determine the expected monetary value of the project if Tees R Us chooses to print 3,000 shirts for the tournament.

Explanation / Answer

We have printed 3000 shirts,Cost of production=3000*10=30000

Lets assume 1000 shirts were sold during the tournament,which means 2000 were sold later,

Hence Selling price=1000*16+2000*5=26000

Now let 2000 shirts be sold during tournament,which means 1000 were sold later

Hence selling price=2000*16+1000*5=37000

Now let 3000 shirts be sold

Hence selling price=3000*16=48000

Now let 4000 shirts be the demand,But company printed only 3000 shirts.Hence only 3000 are sold

Hence selling price=3000*16=48000

Now Expected Monetary Value=Expected Income-Costs incurred

=0.15*26000+0.25*37000+0.3*48000+0.3*48000-30000 =$11950

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.