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Strategic Decision-Making For Merchandise Purchases: A Profit Maximization Approach

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    Strategic Decision - Making for Merchandise Purchases: A Profit Maximization Approach In four weeks it will be time for the NCAA college football championship game, which will be between the Sloths and the Jellyfish. Sports Store Supreme has $50,000 with which to purchase associated merchandise, and wants to determine which of several choices will provide the largest expected profit. These choices are as follows: 1) As sume that the Sloths will win, and p urchase 10,000 shirts at $5.00 each celebrating their victory . These shi rts can be sold for $20.00 each if the Sloths win, and will be donated to charity and claimed as a business expense at $2.00 per shirt if the Sloths lose. 2) Assume that the Jellyfish will win, and purchase 8,500 shirts at $5.00 each celebrating their victory (research shows that there is a smaller percentage of Jellyfish fans that are customers, and it is not expected that 10,000 shirts would sell) . These shirts can be sold for $20.00 each if the Jellyfish win, and will be donated to charity and claimed as a business expense at $2.00 per shirt if the Jellyfish lose. 3) Purchase 5,000 shirts for each team at $5.00 each, understanding that the losing team’s shirts can be donated to charity and claimed as a business expense at $ 2 .00 per shirt. The winning team’s shirts can be sold for $20.00 each. 4) Purchase 10,000 shirts commemorating the event for $5.00 each. These shirts can be sold to fans of either team for $12.00 each regardless of which team wins. The first state of nature will be that the Sloths win the championship. The second state of nature will be that the Jellyfish win the championship. There is no reason

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