Question
In: Economics
Zed and Adrian and run a small bicycle shop called "Z to A Bicycles". They must...
Zed and Adrian and run a small bicycle shop called "Z to A Bicycles". They must order bicycles for the coming season. Zed and Adrian estimate that the demand for bicycles this season will be 20, 30, 40, or 50 bicycles with probabilities of 0.2, 0.4, 0.3, and 0.1 respectively. Orders for the bicycles must be placed in quantities of twenty (20). The cost per bicycle is $70 if they order 20, $64 if they order 40, $56 if they order 60. The bicycles will be sold for $76 each if they are not on sale. Any bicycles left over at the end of the season will go on sale and will be sold at $46 each. Create a payoff table that helps Z to A Bicycle decide how many bicycles (20, 40, or 60) to order. Answer the following questions based on the payoff table.
- How much is the profit of the shop, if they order 40 bicycles and the demand is 20?
- How much is the profit of the shop, if they order 40 bicycles and the demand is 30?
- How much is the profit of the shop, if they order 40 bicycles and the demand is 40?
- How much is the profit of the shop, if they order 40 bicycles and the demand is 50?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Decision under uncertainty Zed and Adrian and run a small bicycle shop called"Z to A Bicycles"....
Decision under uncertainty
Zed and Adrian and run a small bicycle shop called"Z to A
Bicycles". They must order bicycles for the coming month. Orders
for the bicycles must be placed in quantities of twenty (20). If
Zed and Adrian run out of bicycles during the month, then they will
suffer a loss of "goodwill" among their customers. Zed and Adrian
estimate that the demand for bicycles this month will be 10, 30,
50, or 70 bicycles but the probabilities...
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cost-volume-profit analysis, the shop owner has divided sales into
two categories, as follows:
Product Type
Sales Price
Invoice Cost
Sales Commission
High-quality
$
1,150
$
490
$
70
Medium-quality
570
270
60
Three-quarters of the shop’s sales are medium-quality bikes. The
shop’s annual fixed expenses are $196,500. (In the following
requirements, ignore income taxes.)
Required:
Compute the unit contribution margin for each product type.
What is the shop’s sales mix?...
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owner must decide how many bags of deluxe mix and how many bags of
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