DECISION ANALYSIS COURSE

Weekly Exercise/HW#3 Emre Onur AKCAN-190302002

A small retail store sells a particular brand of monochrome and color television sets. Each monochrome set
that is sold earns a profit of $100, while each color set earns $200 profit. The manager of the store
estimates that the weekly demands for each type of set follow the probability distributions shown below. It
can be assumed that the demands for each type of set are independent, as is the week-to-week demand.

a. Determine the possible total profits that can be earned in any given week by selling television
sets and calculate the probability of each of these profits being earned.
b. The following two-digit random numbers have been generated by a computer. Use these numbers to
simulate the demand for the two types of set for a 10-week period and hence calculate the profit that
will be earned in each week. (The first set of numbers should be used for monochrome sets and the
second for color.)

c. Use your simulation results to estimate the probability of particular profits being earned in a given
week. How close are these probabilities to those that you calculated in (a)?
 SOLUTION
A)

To calculate the profit of the sales to be made in any week, let's first calculate our sales probabilities. For this,
we will use the table of quantity and sales probability given for two products.(M=Monochrome set ,C=Color
set)

Demand M C
0 0,2 0,4
1 0,5 0,6
2 0,3 0

Let's calculate the probabilities using the data in the table above.

Sample p(X) Profit

M0C0 0,08 $ -
M0C1 0,12 $ 200,00
M0C2 0 $ -
M1C0 0,2 $ 100,00
M1C1 0,3 $ 300,00
M1C2 0 $ 500,00
M2C0 0,12 $ 200,00
M2C1 0,18 $ 400,00
M2C2 0 $ -

In the table above, we can see the product type, number and possible profit in any week.

Profit p(X)
$ - 0,08
$ 100,00 0,2
$ 200,00 0,24
$ 300,00 0,3
$ 400,00 0,18
$ 500,00 0

Finally, we can see the probability of gains in the table above.

B)

We determine the values given within the ranges and determine how many units of each product were sold that
week.
Demand Interval WEEKS
1 2 3 4 5 6 7 8 9 0
0 00--20 x
1 21--70 x x x x x
2 71-00 x x x x

M2 M2 M0 M1 M1 M1 M2 M1 M2 M1

0 00-40 x x x x
1 41--00 x x x x x x
2

C0 C1 C1 C1 C0 C0 C0 C1 C1 C1

M2C0 M2C1 M0C1 M1C1 M1C0 M1C0 M2C0 M1C1 M2C1 M1C1
$ 200,00 $ 400,00 $ 200,00 $ 300,00 $ 100,00 $ 100,00 $ 200,00 $ 300,00 $ 400,00 $ 300,00

C)

The profits we are simulating are given in the table as probabilities.

Profit p(X)
$ - 0
$ 100,00 0,2
$ 200,00 0,3
$ 300,00 0,3
$ 400,00 0,2
$ 500,00 0

The first chart (a) gives lower probabilities for profits of $100, $200 and $300, while a lower probability for
profits of $400. It gives zero probability of profit of $500. The second chart gives lower probabilities for
profits of $100, $400, while a higher probability for profits of $200 and $300. It gives zero probability of profit
of $500.