88 Deon James stocks a weekly music magazine. He buys the magazines at the beginning of each week for $180.00 each and s

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88 Deon James Stocks A Weekly Music Magazine He Buys The Magazines At The Beginning Of Each Week For 180 00 Each And S 1 (53.53 KiB) Viewed 26 times

88 Deon James stocks a weekly music magazine. He buys the magazines at the beginning of each week for $180.00 each and sells them at the retail price of $300,00 each. At the end of the week unsold magazines are obsolete and have no value, so they are discarded as recycled waste. The estimated probability distribution for weekly demand is shown below. Weekly demand Probability 80 units 0.30 120 units 0.55 160 units 0.15 The actual demand in one week does not affect the actual demand in the following week. Assume no seasonal variations in demand. Required (a) Using the Expected value decision rule, if the owner is to order a fixed quantity of magazines per week, how many should he order? (12 marks) (b) Identify and explain two limitations of expected values when making a decision between or among options. (4 marks)