Question

University of Florida football programs are printed 1 weekprior to each home game. Attendence averages 75,000 screaming and loyal Gator fans , of whom two-thirds usually buy the program,following a normal distribution, for $4 each. Unsold programs are sent to a recycling center that pays only 10 cents per program. The standard deviation is 5,000 programs, and the cost to print each program is $2. Refer to the

standard normal table for z-values.

a) What is the cost of underestimating demand for each program?

Answer 1

The cost of underestimating demand for a football program at the University of Florida is a loss of $1.90 for each program not printed and sold.

Step-by-step explanation:

The cost of underestimating demand for each program is the lost profit per program not sold. For every program the University of Florida fails to print and sell, they miss out on making $4.00 - the selling price. However, since each program costs $2.00 to print, the real loss is $2.00 per underestimated program. Additionally, they would only receive $0.10 from recycling, so the total loss per program not sold because of underestimation would be $1.90 ($2.00 lost profit - $0.10 recycling payment).