Complete the given table to find out the optimal order

Reference no: EM13477954

The Supermarket Store is about to place an order for Halloween candy. One best- selling brand of candy can be purchased at $ 2.40 per box and usually is sold for $ 4.25 per box before and up to Halloween. After Halloween, all the remaining candy can be sold for $ 1.00 per box. Demand for the candy at the regular price is a random variable with the following discrete probability distribution:

Demand (boxes)	Probability
8	0.25
9	0.15
10	0.20
11	0.25
12	0.15

You are required to:

a. Complete the following table to determine the optimal order quantity (Q*).

Each entry in the table represents the profit made by the store for a given combination of demand and stocking quantity.

Demand in boxes	Probability	Q=8	Q=9	Q=10	Q=11	Q=12
8	0.25
9	0.15
10	0.20
11	0.25
12	0.15
Expected profit

b. Determine the optimal order quantity using the critical ratio. Does this order quantity correspond to the answer in part a?

Reference no: EM13477954

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