A t-shirt company is

planning a production run for an event where the attendance (and thus demand

for t-shirts) is uncertain. The event planners have indicated that they think

the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and

20% respectively. The company must pre-order the blank t-shirts (cost=$5 per

shirt) and it can sell finished shirts for $12 apiece. Any finished shirts

that cannot be sold at the event can be sold for $2 apiece to a used clothing

vendor.

Refer to Exhibit 2-1. What Excel function

is useful for calculating the expected value of demand for t-shirts? What is

the expected demand?

What Excel function

is useful for calculating revenue? Explain why it is useful.

What are the two

possible cases for the amount of t-shirts that will be sold to the used

clothing vendor? How would you calculate this amount in a spreadsheet model?

Suppose that blank

t-shirts can only be ordered from the wholesale vendor in batches of 100? How

many t-shirts should the company order?

Suppose now that

blank t-shirts can only be ordered from the wholesale vendor in batches of

50? How many t-shirts should the company order?