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A retailer needs to decide how many units of products to purchase from the manufacturer. The retailer estimates the demand will have a 60% chance
A retailer needs to decide how many units of products to purchase from the manufacturer. The retailer estimates the demand will have a 60% chance to be 50 and 40% chance to be 30. The ordering cost is $6 for each unit. The retail price is $20. For each unit of surplus inventory, the salvage value is $4. The penalty cost for each unit of unmet demand is $6. There are only two feasible ordering strategy: 45 or 40. Which ordering strategy is more beneficial to the retailer?
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