Explore BrainMass
Share

How Much To Order

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

The steak and Chop Butcher Shop purchase steak from a local meatpacking house. The meat is purchased on Monday at $2.00 per pound, and the shop sells the steak for $3.00 per pound. Any steak left over at the end of the week is sold to a local zoo for $.50 per pound. The possible demands for steak and the probability of each are shown in the following table:

Demand (lb.) Probability
20 .10
21 .20
22 .30
23 .30
24 .10
1.00

The shop must decide how much steak to order in a week. Construct a payoff table for this decision situation and determine the amount of steak that should be ordered, using expected value.

© BrainMass Inc. brainmass.com October 17, 2018, 12:44 pm ad1c9bdddf
https://brainmass.com/business/business-management/how-much-to-order-588873

Solution Preview

Please see the attached file:

The steak and Chop Butcher Shop purchase steak from a local meatpacking house. The meat is purchased on Monday at $2.00 per pound, and the shop sells the steak for $3.00 per pound. Any steak left over at the end of the week is sold to a local zoo for $.50 per pound. The possible demands for steak and the probability of each are shown in the following table:

Demand (lb.) Probability
20 0.1
21 0.2
22 0.3
23 0.3
24 0.1
1

The shop must decide how much steak to order in a week. Construct a payoff table for this decision situation and determine the amount of steak that should be ordered, using expected value.

Demand (lb.) Probability
20 0.1
21 0.2
22 0.3
23 0.3
24 0.1
1
Purchase price= $2.00 per pound
Selling price for steak sold = $3.00 per pound
Price at which unsold steak is sold to the zoo= $0.50 per pound

Case I: Quantity ordered= 20 pounds

Purchase Amount= $40.00 =20 x $2.

Demand (lb.) Probability Quantity sold Revenue for sold steak Quantity Unsold (Purchase - Demand) Revenue for steak sold to the zoo Expected ...

Solution Summary

The solution arrives at a decision on how much steak to order by calculating a payoff table for each decision and arriving at the optimal decision.

$2.19
Similar Posting

Healthcare Organizations and inventory control

"Once you identify your physical inventory status, a popular idea used in business to help evaluate your inventory control process is the inventory turnover rate (or ratio) - a topic discussed earlier in McLean in the financial statement analysis chapter. In general business, the inventory turnover ratio is defined as sales divided by inventories, and companies can compare their calculated ratios with industry averages. The questions evaluate this issue in more detail as it pertains to Healthcare Organizations."

In your response please reference the attached chapter from McLean, Robert A. (2003). Financial Management in Health Care Organizations (2nd ed.). Albany, NY: Delmar Publishers.

In practical terms, how would you determine the inventory turnover rate for a HCO which focuses on patient care? How would you use this rate to help manage such a HCO's inventory levels? What are the key problems and issues involved in calculating and using the inventory turnover rate in HCOs?

View Full Posting Details