George’s T-Shirts

8 August 2016

George’s T-Shirts Synopsis: George Lassiter was a project engineer for a major defense contractor. He had an interesting side business of manufacturing and designing T-shirts for rock concerts, sporting events, and fund-raising events. George sold the shirts to his regular crew of vendors for $100 per dozen, and these vendors sold the public for $10 per shirt. He wanted to sell his shirts on a rock concert that was going to be held in two months.

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He was sure that 20,000 tickets for the standing area around the stage would be bought by devoted fans, but he was not sure of the number of people who will attend the concert, and the percentage of the attendees who will buy the shirts. George thought in terms of three possibilities specifically 80,000, 50,000 and 20,000 grand seats which he assumed to be high, medium and low respectively. The probability of 50,000 was as likely as either of the two possibilities combined. And 80,000 and 20,000 were about equally likely, or 80,000 was more likely than 20,000.

He also thought regarding his designs and quality of the shirts, his sales could be ten percent (about 6 times out of 10), five percent, or fifteen (1 time out of 10) percent of the attendance. George requested a cost estimate of shirts supply which is presented in the below table: Order Size Cost 10,000 $32,125 7,500 $25,250 5,000 $17,750 1. Standing Area Attendance 20,000 2. Sale Price to George from Concert Sales: $100 per Dozen or $8. 33 per T-shirt 3. Sale Price of leftover T-shirts to discount clothing chain $1. 50 Per T-shirt George’s Predictions Item/Option Qty Probability Grandstand Attendance-High.

Grandstand attendance-Medium 50,000 0. 5 Grandstand Attendance-Low 20,000 0. 2 Percent of Concert-goers to buy Shirt-High 15% 0. 1 Percent of Concert-goers to buy Shirt-Medium 10% 0. 6 Percent of Concert-goers to buy Shirt-Low 5% 0. 3 Objectives: 1. To find out how many people will attend the concert? 2. To find out how many people will buy T-shirts? 3. To calculate the financial outcomes of these three scenarios. 4. To maximize the profit. Decision Problem: How many shirts to order for the upcoming rock concert? Alternatives: The possible alternatives are 10,000, 7,500 and 5,000 shirts.

The decision will affect the costs and revenues generated from the sale of the number of shirts. The revenue will be affected by the sale price and sales volume. The sales volume is in turn affected by the number of attendees at the concert.

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