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A contractor of second hand motor trucks uses to maintain a stock of trucks every month. The demand of the trucks occurs at a constant rate but not in constant size. The probability distribution of the demand is as shown below:
Demand (r): 0 1 2 3 4 5 6 or more.
Probability p(r): 0.40 0.24 0.20 0.10 0.05 0.01 0.00
The holding cost of an old truck in stock for one month is /Rs.100/- and penalty for a truck if not delivered to the demand, is Rs. 1000/-. Determine the optimal size of the stock for the contractor.
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