Martin Stevens, the manager of a downtown stationary shop must decide how many cartons of Valentines cards to order for the 2019 holiday. Martin has estimated demand will be 40, 80, or 120 cartons and has to decide whether to order 40, 80, or 120 cartons from his supplier. Each carton costs the shop $4.25 and will be sold for $10.00. Any unsold cartons will be sent back to the supplier and Martin will receive a $2.00 refund for each carton that he returns to the supplier. Past sales and some additional research have given the following probability estimates for demand levels: 40 cartons, 0.30; 80 cartons, 0.40; 120 cartons, 0..30. a. Construct a payoff table for this problem (alternatives matching the demand levels.) b. Calculate the Expected Value for each alternative. c. Based on your calculations, how many cartons of cards should Martin order from his supplier?
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