What is their expected out of stock probability

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Reference no: EM132251113

Books End, a bookstore, is trying to decide on how many copies of a book to purchase at the start of the upcoming selling season. The book retails at $28.00. The publisher sells the book to Books End at $20.00. Books End will dispose of all of the unsold copies of the book at 50% off the retail price, at the end of the season. Books End estimates that demand for this book during the season is Normal with a mean of 1000 and a standard deviation of 250.

a. What is the Underage (Cu) and Overage (Co) cost for Books End in this situation?

a) Cu = $8, Co = $20

b) Cu = $8, Co = $6

c) Cu = $8, Co = $10

d) Cu = $28, Co = $20

b. Suppose Books End wants to maximize his expected profits from the sale of this book. How many copies should he order from the publisher?

c. Suppose Books End orders 1100 copies. What is their expected out-of-stock probability?

Reference no: EM132251113

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