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Manager of apparel division

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Mr. W, the manager of apparel division (separately operated) at a Book Store, have to decide how many blue winter jackets to order for this winter. Since Mr. W's father owns a jacket production company, he can get the jackets at the price of production cost, which is $50. And the jackets will be sold at $80. After the winter season, his father promises to buy back all the leftovers at $30.

The winter demand for bluejackets is estimated as the following tables.

Demand    Probability     Cumulative Prob.

40             .05                                   0.05

50              .15                                  0.20

60              0.20                               0.40

70              0.30                                  0.70

80               0.15                                0.85

90              0.10                                 0.95

100            0.05                                  1.00

What would be the shortage(underage) cost?

Reference no: EM131103181

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