Explore the impact of demand probability

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Reference no: EM13710912

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?

I need help to describe the impact of demand probability on the optimal ordering quantity.

Reference no: EM13710912

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