Explain expected lost sales

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You operate a small tee-shirt silk screening company. Your local professional football team has just made it to the NFC Championship game, which will be played in one week. You are considering selling tee-shirts with "NFC Champions" blazed across the top of the shirt along with the local team's name and mascot. If the team indeed wins, these shirts will sell extremely well, but if they lose, then there will clearly be no demand for these shirts. Unfortunately, you must print the shirts before the game because otherwise there will not be enough time to take advantage of the hype. You estimate that there is only a 40% chance the local team will win, but if they win, you figure your demand will be normally distributed with mean 15000 and standard deviation 6000. It costs $5.50 to buy and silk screen each shirt, you will sell these shirts for $12.50 each and any leftover shirts (whether the team wins or loses) can be sold to a liquidator for $0.50 each.

Suppose you print 18,000 shirts and suppose you get lucky and the team wins. What are your expected lost sales? (answer to the nearest whole number)

Reference no: EM132738486

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