Explore the Impact of Demand Probability on Optimal Ordering Quantity
Problem- An operator assigns the following probabilities of demand for a magazine:
Demand Probability
10 copies 0.10
11 copies 0.15
12 copies 0.20
13 copies 0.25
14 copies 0.30
Each magazine sells for 50 cents and costs 30 cents.
Part 1- If the operator can return any unsold copies for full credit, how many should be ordered?
Part 2- If the operator cannot return unsold copies, how many copies should be ordered? What is the optimum expected profit in this scenario?
