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The daily demand for a product in a shop can assume one of the following values: 100, 120, or 130 items with probabilities 0.2, 0.3 and 0.5. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 55 cents per item. Assume that the owner pays 60 cents per item and sells it for 100 cents, find the optimal stock level.

The daily demand for a product in a shop can assume one of the following values: 100, 120, or 130 items with probabilities 0.2, 0.3 and 0.5. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 55 cents per item. Assume that the owner pays 60 cents per item and sells it for 100 cents, find the optimal stock level.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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The daily demand for a product in a shop can assume one of the following values: 100, 120, or 130 items with probabilities 0.2, 0.3 and 0.5. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 55 cents per item. Assume that the owner pays 60 cents per item and sells it for 100 cents, find the optimal stock level. 

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