7. A firm sells a perishable product, with a time window for sales limited to 1 month. The product is ordered once per month, and the delivery lead time is very small, so that the useful shelf life is really 1 month. Each piece is bought at €10 and it's sold for €14; if the product expires, it can be scrapped for €2 per unit. Over the last 4 months a positive trend in sales has been observed: Month Jan Feb Mar Apr Sales 102 109 123 135 Hence, the firm resorts to linear regression to forecast sales over the next period. How many items should the firm buy, in order to maximize expected profit in May?
7. A firm sells a perishable product, with a time window for sales limited to 1 month. The product is ordered once per month, and the delivery lead time is very small, so that the useful shelf life is really 1 month. Each piece is bought at €10 and it's sold for €14; if the product expires, it can be scrapped for €2 per unit. Over the last 4 months a positive trend in sales has been observed: Month Jan Feb Mar Apr Sales 102 109 123 135 Hence, the firm resorts to linear regression to forecast sales over the next period. How many items should the firm buy, in order to maximize expected profit in May?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Transcribed Image Text:7. A firm sells a perishable product, with a time window for sales limited to 1 month.
The product is ordered once per month, and the delivery lead time is very small, so
that the useful shelf life is really 1 month. Each piece is bought at €10 and it's sold
for €14; if the product expires, it can be scrapped for €2 per unit. Over the last 4
months a positive trend in sales has been observed:
Month
Jan
Feb
Mar
Apr
Sales
102
109
123
135
Hence, the firm resorts to linear regression to forecast sales over the next period.
How many items should the firm buy, in order to maximize expected profit in May?
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