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Hi John,
There is no lecture for the q on uncertainty in your revision notes and im working on the paper, bit brain dead i think the profit table how did they get 10 and (80) for the contract size of 20 and 30 with demand of 10…. please show me the calculations. I understand how they got (80) just not the 10. Infact please work the table for me… im not getting it.
Thanks
Units sold make a profit of $20 – $10 = $10 per unit.
Units not sold (and therefore sold as scrap) make a loss of $1 – $10 = $9 per unit.So….if we buy 20 and only sell 10. The 10 we sell gives us a profit of 10 x $10 = $100
The 10 that are left unsold make a loss of 10 x $9 = a loss of $90.
So…the total profit is 100 – 90 = $10.If we buy 30 and only sell 10, then again the 10 we sell give us a profit of $100. The 20 that we do not sell make a loss of 20 x $9 = a loss of $180.
So the total is a loss of 100 – 180 = a loss of $80.If these two make sense, then you should be able to sort out the others yourself.
(Obviously if we buy 10, then whatever the demand is, we can only sell 10!!)John has anyone ever told you that you a star!!!…. (claps hands)…. you make difficult things easy….. thank you…..
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