Answer to Question #180159 in Math for Flora Kim

Question

(b) Orders for clothing to cater for the coming festive season must be placed a month earlier. The cost per unit for a new fashion dress is RM30 while the anticipated selling price is RM60. Dresses that are not sold during the festive season can be sold for RM25 to a discount store. Demand is projected to be 60, 70, or 80 units. There is 50% chance that the demand will be 60 units, a 30% chance that the demand is 70 units, and a 20% chance that the demand will be 80 units.

(I) Draw a payoff table.

Answer 1

Let x - quantity of new fashion dress, then

$$0.5\times60\times60+0.3\times60\times70+0.2\times60\times80=4020$$

$$30x=4020+25(x-(0.5\times60+0.3\times70+0.2\times80))$$

$$30x=4020+25(x-67)$$

$$30x=4020+25x-1675$$

$$5x=2345$$

$$x=469$$

Minimum quantity of new fation dress.

Payoff table:

50% 3600

30% 4200

20% 4800