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are157-homework-3.1

are157-homework-3.1 - A RE 157 ANALYSIS FOR PRODUCTION...

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ARE 157 ANALYSIS FOR PRODUCTION MANAGEMENT Homework 3 _ du..L rA(M~ MCU;j 111 ~ l4. Clll Ss 1. (8) Janelle sells copies of the Daily Racing Form, a horse-racing betting guide, at Bay Meadows Racetrack. She purchases each copy at wholesale for \$3.00, and sells it at retail for \$5.00. The opportunity cost of her time is \$.35 per sale, for the transactions'she completes. Due to their time-dependent content, any Racing Forms that are not sold are discarded at the end of each day for recyclmg and bring in no revenue. Based on past sales experience, Janelle knows the probability of selling various quantities of papers is: # of papers P(d) P(D) 25 0 26 .10 27 .25 28 .20 29 .15 30 .15 31 .12 32 .03 33 or more 0 a. Find P(D), the probability of "stocking ouf' (selling every copy in stock) for each level of forms ordered. b. What is the optimal probability of stocking out? How many forms should Janelle order each day? c. What is the average number of forms she sells per day? Also, what is the average number of forms she discards each day?

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