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Profit of Tory Company

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Tory Company sells a single product. Troy estimates demand and costs at various activity levels as follows:
Units Sold Price Total Variable Costs Fixed Costs
120,000 $48 $3,000,000 $1,000,000
159,000 $45 $3,550,000 $1,000,000
160,000 $40 $4,000,000 $1,000,000
180,000 $35 $4,500,000 $1,000,000
200,000 $30 $5,000,000 $1,000,000
How much profit will Troy have if a price of $45 is charged?

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Solution Summary

This solution computes profit of the Tory Company if a price of $45 is charged with all workings shown step-by-step in an excel file.

$2.19
See Also This Related BrainMass Solution

Management Decisions (Stats problems 3, 4): optimistic strategy, conservative strategy, utility,

(See attached file for full problem description)

3. The table shows both prospective profits and losses for a company, depending on what decision is made and what state of nature occurs. Use the information to determine what the company should do.

s1 s2 s3
d1 30 80 -30
d2 100 30 -40
d3 -80 -10 120
d4 20 20 20

a. if an optimistic strategy is used.
b. if a conservative strategy is used.
c. if minimax regret is the strategy.

4. Dollar Department Stores has the opportunity of acquiring either 3, 5, or 10 leases from the bankrupt Granite Variety Store chain. Dollar estimates the profit potential of the leases depends on the state of the economy over the next five years. There are four possible states of the economy as modeled by Dollar Department Stores, and its president estimates P(s1) = .4, P(s2) = .3, P(s3) = .1, and P(s4) = .2. The utility has also been estimated. Given the payoffs (in $1,000,000's) and utility values below, which decision should Dollar make?

Payoff Table

State Of The Economy
Over The Next 5 Years
Decision s1 s2 s3 s4

d1 -- buy 10 leases 10 5 0 -20
d2 -- buy 5 leases 5 0 -1 -10
d3 -- buy 3 leases 2 1 0 - 1
d4 -- do not buy 0 0 0 0

Utility Table

Payoff (in $1,000,000's) +10 +5 +2 +1 0 -1 -10 -20
Utility +10 +5 +2 +1 0 -1 -20 -50

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