answers in a Microsoft Excel workbook, with each problem on a separate
worksheet. Label each tab in the workbook with the exercise number. Highlight
the answers in yellow and provide an interpretation in a text box.
22.1 Set up
the opportunity loss table from the following payoff table:
22.2 Draw the decision tree for
22.11 The owner of a clothing store must decide
how many men's shirts to order for the new season. For a particular type of
shirt, she must order in quantities of 100 shirts. If she orders 100 shirts,
her cost is $10 per shirt; if she orders 200 shirts, her cost is $9 per shirt; and
if she orders 300 or more shirts, her cost is $8.50 per shirt. Her selling
price for the shirt is $12, but any shirts that remain unsold at the end of the
season are sold at her famous "halfprice, end-of-season sale.” For the
sake of simplicity, she is willing to assume that the demand for this type of
shirt will be 100, 150, 200, or 250 shirts. Of course, she cannot sell more
shirts than she stocks. She is also willing to assume that she will suffer no
loss of goodwill among her customers if she understocks and the customers
cannot buy all the shirts they want. Furthermore, she must place her order
today for the entire season; she cannot wait to see how the demand is running
for this type of shirt.
a. Construct the payoff table to help the owner decide how
many shirts to order.