Question

following probability model: 

Demand 75 80 90 95 

Probability 0.05 85 0.30 0.20 0.15 0.30 

This textbook costs the bookstore $82 and sells for $107. Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refund of $36. 

a) Based on the given information, Vaidy's conditional profits table for the bookstore is: 

Answer 1

The solution to the problem A.11:

Given data:

Cost of the book = $82

Selling price = $107

Refund = $36

Profit = 107 – 82 = $25

Loss = 82 – 36 = $46

Here, we need to calculate the conditional profitability as follows.

In case of Stock of 90 and demand 75,

The profit will be 75 * 25 = 1875

The loss due to refund = (90 – 75) * 46 = 15*46 = 690

The conditional profit = 1875 – 690 = 1185

Similarly calculate for each demands. The conditional profit will be as follows.

	75	80	85	90	95
90	1185	1540	1895	2250	2250

In the case of demand of 95 books, the sales will be of 90 units only. Hence, it will have the profit from the sales of 90 units only.