Business Topics Covered In This Content

	Cost of urchase ($ per kg)	15
	Sale price ($ per kg)	30
	Salvage price ($ per kg)	10
	Cost of underage	15
	Cost of overage	5



Optimistic rule (Maximax)
						Maximum
Sales	10	15	20	25	30	Payoff
10	150	150	150	150	150	150
15	125	225	225	225	225	225
20	100	200	300	300	300	300
25	75	175	275	375	375	375
30	50	150	250	350	450	450

Laplace rule (Average)
						Average
Sales	10	15	20	25	30	Payoff
10	150	150	150	150	150	150
15	125	225	225	225	225	205
20	100	200	300	300	300	240
25	75	175	275	375	375	255
30	50	150	250	350	450	250

Maximizing expected value

Prob	0.1	0.2	0.4	0.2	0.1	Expected
Sales	10	15	20	25	30	Value
10	150	150	150	150	150	150
15	125	225	225	225	225	215
20	100	200	300	300	300	260
25	75	175	275	375	375	265
30	50	150	250	350	450	250


Probability	Cumulative Probability	Number of No-shows	Sensitivity Analysis
0.1	0.1	0	Overbooked Rooms	Average Cost
0.15	0.25	1	0	128.23
0.3	0.55	2	1	94.96
0.15	0.7	3	2	50.03
0.2	0.9	4	3	19.43
0.1	1	5	4	0
			5	0
Lower Randome Number	Upper Random Number	Number of No-shows	Rooms Overbooked	2
0	0.1	0
0.1	0.25	1	Cost per short room	125
0.25	0.55	2	Cost per vacant room	50
0.55	0.7	3
0.7	0.9	4	Average Daily Cost	38.13333333
0.9	1	5

Day	RN of No- shows	No shows	Short rooms	Short Cost	Vacant Rooms	Vacant Cost	Total Cost
1	0.675846923	3	1	125	1	50	175
2	0.664119967	3	1	125	1	50	51
3	0.75079751	4	2	250	2	100	102
4	0.348496753	2	0	0	0	0	0
5	0.187807504	1	0	0	0	0	0
6	0.976809756	4	2	250	2	100	102
7	0.629112621	3	1	125	1	50	51
8	0.654359306	3	1	125	1	50	51
9	0.514885822	2	0	0	0	0	0
10	0.194175137	1	0	0	0	0	0
11	0.350453904	2	0	0	0	0	0
12	0.011228897	0	0	0	0	0	0
13	0.514759112	2	0	0	0	0	0
14	0.221079517	1	0	0	0	0	0
15	0.158821758	1	0	0	0	0	0
16	0.667304196	3	1	125	1	50	51
17	0.966799737	4	2	250	2	100	102
18	0.158313105	1	0	0	0	0	0
19	0.487062523	2	0	0	0	0	0
20	0.77580503	4	2	250	2	100	102
21	0.112508395	1	0	0	0	0	0
22	0.82223367	4	2	250	2	100	102
23	0.125319744	1	0	0	0	0	0
24	0.870356501	4	2	250	2	100	102
25	0.229727278	1	0	0	0	0	0
26	0.043384646	0	0	0	0	0	0
27	0.941932932	4	2	250	2	100	102
28	0.450733042	2	0	0	0	0	0
29	0.153619749	1	0	0	0	0	0
30	0.698281302	3	1	125	1	50	51
						Total	1144


					SUMMARY OUTPUT

					Regression Statistics
					Multiple R	0.8595
					R Square	0.7388
					Adjusted R Square	0.6642
					Standard Error	1588.2080
					Observations	10

					ANOVA
Significance F						df	SS	MS	F	Significance F
0.0016					Regression	2	49939168.3072	24969584.1536	9.8991	0.0091
					Residual	7	17656831.6928	2522404.5275
					Total	9	67596000.0000

Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%			Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
13987.026	18465.756	13987.026	18465.756		Intercept	16699.519	1462.676	11.417	0.000	13240.839	20158.199	13240.839	20158.199
-1254.782	-424.533	-1254.782	-424.533		Mileage	-0.039	0.087	-0.453	0.664	-0.245	0.166	-0.245	0.166
					Age (years)	-507.303	758.280	-0.669	0.525	-2300.351	1285.744	-2300.351	1285.744

Part a				Part b				Part c
Known parameters	Product A			Known parameters	Product A			Known parameters	Product A	Product B
Selling price	15			Selling price	15			Selling price	15	20
Fixed cost	2400			Fixed cost	2400			Fixed cost	2400	3600
Variable cost per unit	7			Variable cost per unit	7			Variable cost per unit	7	10

Variables				Variables				Variables
Number of units	300			Number of units	500			Number of units	2000	1000

Results				Results				Results
Total revenue	4500			Total revenue	7500			Total revenue	30000	20000
Fixed cost	2400			Fixed cost	2400			Fixed cost	2400	3600
Total variable costs	2100			Total variable costs	3500			Total variable costs	14000	10000
Total costs	4500			Total costs	5900			Total costs	16400	13600
Profit	0			Profit	1600			Profit	13600	6400
								Total profit	20000

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