The Great Risk Of Stocking Essay Discussion Paper

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**Step 1/1**

**ANSWER:-**

1) Beth should order 4 cases of strawberries in order to maximize her profits.

This is because the past 90 days of sales data shows that the average demand for strawberries is 4 cases per day.

By ordering 4 cases, Beth can be sure that she will not have any unsold strawberries that have to be thrown away, as this would lead to a loss in profits.

If Beth orders more than 4 cases, she risks having unsold strawberries that she will not be able to sell and thus lose money on.

On the other hand, if Beth orders less than 4 cases, she will not be able to meet the demand for strawberries and thus miss out on potential profits.

Therefore, ordering 4 cases is the best option for Beth in order to maximize her profits.

2) The expected monetary value of the various courses of action is as follows: Order 0 cases: The Great Risk Of Stocking Essay Discussion Paper

The expected monetary value is $0, as there is no expected monetary value associated with not ordering any cases of strawberries.

Order 1 case: The expected monetary value is $8, as the expected monetary value is equal to the cost of the case multiplied by the probability of selling it (25%).

Order 2 cases: The expected monetary value is $14, as the expected monetary value is equal to the cost of two cases multiplied by the probability of selling both of them (25%).

Order 3 cases: The expected monetary value is $18, as the expected monetary value is equal to the cost of three cases multiplied by the probability of selling all three of them (25%).

Order 4 cases: The expected monetary value is $20, as the expected monetary value is equal to the cost of four cases multiplied by the probability of selling all four of them (25%).

3) The value of perfect information in this case would be considerable.

With perfect information, Beth Perry would be able to accurately forecast the number of strawberries she needs to purchase each day in order to maximize her profits.

She would know exactly how many strawberries to order so that she never has to worry about having too many or too few.

Perfect information would also enable Beth to avoid the risk of stocking too many strawberries and having them go bad before they are sold, thus eliminating the need for her to have a high markup to cover the cost of spoilage.

Finally, perfect information would allow Beth to adjust her pricing strategy to ensure that she is achieving the highest possible profits from her sales.

By utilizing perfect information, Beth would be able to maximize her profits and minimize her risks.

4) The expected opportunity loss of the various options will depend on the probabilities of each sales volume occurring.

If there is an equal probability of each sales volume occurring, then the expected opportunity loss of ordering 0 cases is $24, the expected opportunity loss of ordering 1 case is $16, the expected opportunity loss of ordering 2 cases is $8, and the expected opportunity loss of ordering 3 cases is $0.

Alternatively, if the probabilities of each sales volume occurring are not equal, then the expected opportunity loss of each option can be calculated by multiplying the probability of each sales volume occurring with the respective opportunity loss of each option.

**Final answer**

**ANSWER:-**

1) Beth should order 4 cases of strawberries in order to maximize her profits.

This is because the past 90 days of sales data shows that the average demand for strawberries is 4 cases per day.

By ordering 4 cases, Beth can be sure that she will not have any unsold strawberries that have to be thrown away, as this would lead to a loss in profits.

If Beth orders more than 4 cases, she risks having unsold strawberries that she will not be able to sell and thus lose money on.

On the other hand, if Beth orders less than 4 cases, she will not be able to meet the demand for strawberries and thus miss out on potential profits.

Therefore, ordering 4 cases is the best option for Beth in order to maximize her profits.

2) The expected monetary value of the various courses of action is as follows: Order 0 cases: The Great Risk Of Stocking Essay Discussion Paper

The expected monetary value is $0, as there is no expected monetary value associated with not ordering any cases of strawberries.

Order 1 case: The expected monetary value is $8, as the expected monetary value is equal to the cost of the case multiplied by the probability of selling it (25%).

Order 2 cases: The expected monetary value is $14, as the expected monetary value is equal to the cost of two cases multiplied by the probability of selling both of them (25%).

Order 3 cases: The expected monetary value is $18, as the expected monetary value is equal to the cost of three cases multiplied by the probability of selling all three of them (25%).

Order 4 cases: The expected monetary value is $20, as the expected monetary value is equal to the cost of four cases multiplied by the probability of selling all four of them (25%).

3) The value of perfect information in this case would be considerable.

With perfect information, Beth Perry would be able to accurately forecast the number of strawberries she needs to purchase each day in order to maximize her profits.

She would know exactly how many strawberries to order so that she never has to worry about having too many or too few.

Perfect information would also enable Beth to avoid the risk of stocking too many strawberries and having them go bad before they are sold, thus eliminating the need for her to have a high markup to cover the cost of spoilage.

Finally, perfect information would allow Beth to adjust her pricing strategy to ensure that she is achieving the highest possible profits from her sales.

By utilizing perfect information, Beth would be able to maximize her profits and minimize her risks.

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4) The expected opportunity loss of the various options will depend on the probabilities of each sales volume occurring.

If there is an equal probability of each sales volume occurring, then the expected opportunity loss of ordering 0 cases is $24, the expected opportunity loss of ordering 1 case is $16, the expected opportunity loss of ordering 2 cases is $8, and the expected opportunity loss of ordering 3 cases is $0.

Alternatively, if the probabilities of each sales volume occurring are not equal, then the expected opportunity loss of each option can be calculated by multiplying the probability of each sales volume occurring with the respective opportunity loss of each option. The Great Risk Of Stocking Essay Discussion Paper