A concert promoter must decide how many T-shirts to stock for the upcoming conce

Question

A concert promoter must decide how many T-shirts to stock for the upcoming concert at the local college. Each T-shirt costs $7 to order and will sell for $15. Assume any leftover T’s can be sold (salvaged) for $2 each. The T-shirts can only be ordered in lots of 200. The promoter predicts that demand for the T-shirts will likely be low (around 500), will possibly be high (around 750), and that there is a slight chance that demand will be very high (around 1000). Assume that your decision alternatives are to order 400, 600, 800, or 1000 T-shirts.

a)      What respective probabilities would you assign to “likely”, “possibly”, and “slight chance”, respectively? Make sure your probabilities add up to 100%.

b)      Use the probabilities you estimated in part a) to determine the optimal number of T-shirts to order.

c)      List the Decision Analysis Table for this problem.

Explanation / Answer

Probability Decision Analysis :-

The stastical risk probability chart above shows that:-

It is "LIKELY" that it may happen "sometimes" that the required number of T-shirts would be 400 under normal conditions, but its "HIGHLY" not going to happen that the demand under these condition will be 800 or 1000.

"POSSIBLY" the demand for T-shirts would be of 600, under normal conditions, and in these conditions, it is "Highly unlikely" that the demand will be of 1000 T-shirts.

So, in this decision analysis table, it is clear that the estimated number of T-shirts the Concert Promoter should order would be 600. This will be the OPTIMAL number of T-shirts for this college concert.

400 600 800 1000 Might happen but not in normal conditions. Slight chance LOW LOW MEDIUM HIGH Expected to Happen in normal condition Possibly LOW MEDIUM MEDIUM HIGH May happen sometime Likely MEDIUM MEDIUM HIGH HIGH RISK --->

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