A seller stocks at the beginning of the day an item that perishes that same day. On any given day the demand is either 1, 2, 3 or 4 items with probabilities 0.02, 0.05, 0.33 and 0.6. Each item costs to the seller $1 and he sells them for $1.16 each. If an item cannot be sold in the same day, the item perishes and it is a total loss for the seller. Compute the number of items that should be stocked at the beginning of the day to maximize seller's expected daily profit?

Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
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Chapter2: Second-order Linear Odes
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A seller stocks at the beginning of the day an item that perishes that same day. On
any given day the demand is either 1, 2, 3 or 4 items with probabilities 0.02, 0.05,
0.33 and 0.6. Each item costs to the seller $1 and he sells them for $1.16 each. If an
item cannot be sold in the same day, the item perishes and it is a total loss for the
seller. Compute the number of items that should be stocked at the beginning of the
day to maximize seller's expected daily profit?
Transcribed Image Text:A seller stocks at the beginning of the day an item that perishes that same day. On any given day the demand is either 1, 2, 3 or 4 items with probabilities 0.02, 0.05, 0.33 and 0.6. Each item costs to the seller $1 and he sells them for $1.16 each. If an item cannot be sold in the same day, the item perishes and it is a total loss for the seller. Compute the number of items that should be stocked at the beginning of the day to maximize seller's expected daily profit?
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