2

The probability of each discrete demand is shown in the table below. The sales price per unit is $2,500. The cost per unit is $1,800. The return price is $1,700. Thus the understock cost per unit (co) equals $2,550 - $1,800 = $750, and the overstock cost per unit (cu) is $1,800 - $1,600 = $200.

P(x) 100 0.02 110 0.05 120 0.08 130 0.09 140 0.11 150 0.16 160 0.20 170 0.15 180 0.08 190 0.05 200 0.01

What is the expected number of calendars demanded? (Bear in mind that this is likely to be different number than number of the calendars that the news vendor will sell because the news vendor can only sell a calendar if the vendor ordered them ahead of time. This is referred to as the unconditional demand.) Show your work.

What is the expected number of calendars sold, expected understock cost. expected overstock cost and the expected total cost (i.e., the sum of expected overstock cost and expected understock cost) if 100 calendars are ordered? 1.2.1. Expected sales = 1.2.2. Expected understock cost 1.2.3. Expected overstock cost = 1.2.4. Expected total cost =