Question
Cooper plans to sell eReaders to consumers at price $150 in the coming season. He forecasts the demand D to be normally distributed, with D
Cooper plans to sell eReaders to consumers at price $150 in the coming season. He forecasts the demand D to be normally distributed, with D N ( = 750, 2 = 2502 ). Before the selling season, Cooper must order eReaders from the producer at price $100. After the selling season, Cooper has two options to dispose the leftover inventory. (i) He can sell all the leftover eReaders to the secondary market at $70. (ii) He can sell the leftover eRreaders back to the producer at price $90; however, Cooper must paid the handling cost at $10 per unit.
(a) If Cooper decides to dispose the leftover in the secondary market, what quantity should he order?
(b) If Cooper seeks to maximize his expected profit, what quantity should he order?
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