Demand ( in units ) 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 Probabili ty 0 0 1 0 0 2 0 0 3 0 0 5 0 0 1 0 1 2 0 1 2 0 1 0 0 0 0 9 0 0 8 0 0 6 0 0 4 0 0 1 Cost of overstocking Rs 3 8 Cost of understocking Rs 5 0 Considering the costs of understocking and overstocking, how many units should the business owner stock to maximize the expected profit

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Demand ( in units ) 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4

Demand

(

in units

)

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

Probabili ty

0.0

1

0.0

2

0.0

3

0.0

5

0.0

1

0.1

2

0.1

2

0.1

0.0

0.0

9

0.0

8

0.0

6

0.0

4

0.0

1

Cost of overstocking

=

. 38

Cost of understocking

=

. 50

Considering the costs of understocking and overstocking, how many units should the business owner stock to maximize the expected profit?

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