The Gilbert Air Conditioning Company is considering purchase of a special shipment of portable air conditioners from Japan. Each unit will cost Gilbert $80 and be sold for $125. Gilbert does not want to carry over surplus air conditioners to the following year.
Thus, all surplus units will be sold to a wholesaler who has agreed to take them for $50 per unit. Given the probability distribution for air conditioners shown below, recommend an order quantity and the anticipated profit using expected value analysis:
|
Demand
|
Estimated Probability
|
|
0
|
.30
|
|
1
|
.35
|
|
2
|
.20
|
|
3
|
.10
|
|
4
|
.05
|