PMRISK AND UNCERTAINTY (EV)

Example 1 John has a factory capacity of 1,200 units per month. Units cost him $6 each to make and his normal selling price is $11 each. However, the demand per month is uncertain and is as follows: Demand Probability 400 0.2 500 0.3 700 0.4 900 0.1 He has been approached by a customer who is prepared to contract to a fixed quantity per month at a price of $9 per unit. The customer is prepared to sign a contract to purchase 300, 500, 700 or 800 units per month. The company can vary production levels during the month up to the maximum capacity, but cannot carry forward any unsold units in inventory. (a) Calculate all possible profits that could result ANSWER: ANSWER TO EXAMPLE 1 DEMAND 400u 500u 700u 900u 300u 2,900 3,400 4,400 5,400 500u 3,500 4,000 5,000 5,000 700u 4,100 4,600 4,600 4,600 800u 4,400 4,400 4,400 4,400 THIS IS THE SOLUTION, IM NOT GETTING ITS CALCULATION. PLEASE HELP!