Palmer Jam Company is a small manufacturer of several different jam products. On

Question

Palmer Jam Company is a small manufacturer of several different jam products. One product is an organic jam that has no preservatives, sold to retail outlets. Susan Palmer must decide how many cases of jam to manufacture each month. The probability that demand will be 7 cases is 0.05, for 8 cases it is 0.30, for 9 cases it is 0.50, and for 10 cases it is 0.15. The cost of every case is $40, and the price Susan gets for each case is $80. Unfortunately, any cases not sold by the end of the month are of no value as a result of spoilage.

Based on the given information, Susan's conditional profits table for jam is: a). (COMPLETE TABLE)

7 cases

p= 0.05

8 cases

p= 0.30

9 cases

p= 0.50

10 cases

p= 0.15

b)The number of cases that Susan should produce to achieve maximum expected value (EMV) is _____ cases.

c) The EMV of stocking this number of cases is $_______.

Demand Produce

7 cases

p= 0.05

8 cases

p= 0.30

9 cases

p= 0.50

10 cases

p= 0.15

7 cases

Explanation / Answer

b) The number of cases that Susan should produce to achieve maximum expected value (EMV) is 9 cases.

c) The EMV of stocking this number of cases is $ 328.

Produce 7 cases (0.05) 8 cases (0.30) 9 cases (0.50) 10 cases (0.15) Total cases Sold Total Revenue Cost Profit Sold Sold Sold Sold Probability x sold Sold case * 80 Produce * 40 Revenue - Cost 7 cases 7 7 7 7 7 560 280 280 8 cases 7 8 8 8 7.95 636 320 316 9 cases 7 8 9 9 8.6 688 360 328 10 cases 7 8 9 10 8.75 700 400 300

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