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In august 211 a car dealer is trying to determine how many 2012 models should be ordered. Each car costs the dealer $20,000. The demand for the dealer's 2012 models has the probability distribution shown in table 1. Each car is sold for $30,000. If the demand for 2012 cars exceeds the number of cars ordered in August, the dealer must reorder at a cost of $24,000 per car. If the demand for 2012 are falls short, the dealer may dispose of excess cars in an end-of-model-year sale for $18,000 per car.
1. What Kind of inventory model can be adopted in this decision problem?
Table 1
No. of cars Demand
20
25
30
35
40
Probability
.30
.15
.20
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