The purchasing agent at Electronics Warehouse buys clothes dryers by the trucklo

Question

The purchasing agent at Electronics Warehouse buys clothes dryers by the truckload at the start of each model year.

There are 100 dryers in a truckload. The purchasing agent is considering the purchase of either one, two or three truckloads for the coming year.

Dryers cost $80 each from the supplier, and are sold by Electronics Warehouse during the model year for $100 each. At the end of the model year, unsold dryers are disposed of at a sale for a price of $70 each.

The purchasing agent anticipates that demand during the regular model year will be for either 150, 250, or 280 dryers.

1) Build a payoff table showing net profit for the buyer’s decision.

Explanation / Answer

There is profit of 100-80 = 20 dollar against each sold dryer and loss of 80-70 = 10 dollar against each unsold dryer.

So payoff table will be constructed accordingly as follows:

Excel formula:

payoff table: values of profit in $ demand (no. of dryers)-> 150 250 280 orders (no. of dryers) alternatives 100 2000 2000 2000 200 2500 4000 4000 300 1500 5000 5600

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