George S T Shirts Case Analysis
George Lassiter makes t-shirts for special events such as concerts. The upcoming concert presents another opportunity for George to make and sell t-shirts; however the question is how many t-shirts to produce. There are two fundamental case questions that must be answered:
1. What are the possible financial outcomes if Lassiter orders 5,000 T-shirts? 7,500? 10,000?
As shown in the Exhibit, a rather simple but detailed decision tree has been made which represents the various options for George. The financial outcomes for the three different amounts of t-shirts that he can provide are presented in tabular form, in the Appendix. Table 1 shows profit outcomes for ordering 5000 shirts, Table 2 shows profit outcomes for …show more content…
For the option of producing 5000 shirts, the risk analysis indicates clearly that there is no loss with this option. There is a 6% probability of making a profit of $3416 or less and a 0% probability of making a loss. This trumps the other two options as this is the only option for George which does not involve any losses. The probability of making a $23,916 profit or less with 5000 shirts is 42%. With the same probability in the 7500 shirts option, the 5000 shirt option fares better once again as it makes a slightly higher profit. The biggest setback for George in the 5000 shirt option is regarding the maximum profit that he can earn.