Jumbo James Sells Hotdogs Out of a Cart for $3 $\begin{array}{ll}\text { Demand Per Day }&\text { Probability }\\100 & 0.50 \\200 & 0.30 \\300 & 0.20\end{array}$

Short Answer

Jumbo James sells hotdogs out of a cart for $3.00 each. The cost to purchase and prepare the hotdog is $1.15 each. James operates the small business with very few capital assets and has no place to store unsold hotdogs. For this reason, every evening he sells the unsold hotdogs to a local homeless shelter for $0.50 each. Jumbo James will choose one of the following options as a standard stocking plan: d₁ = 100; d₂ = 150; or d₃ = 200 hotdogs. On any weekday, the demand for hotdogs and the probability of selling them is estimated as follows:
$\begin{array}{ll}\text { Demand Per Day }&\text { Probability }\\100 & 0.50 \\200 & 0.30 \\300 & 0.20\end{array}$
a. Determine the expected value if Jumbo James stocks 200 hotdogs every day.
b. Determine the expected value if Jumbo James decides to stock 150 hotdogs every day.