Rose Butt stocks a weekly sports magazine. He buys the magazines at the beginning of each week for $30.00 each and sells them at the retail price of $50.00 each. At the end of the week unsold magazines are obsolete and have no value, so they are discarded as recycled waste. The estimated probability distribution for weekly demand is shown below.

Weekly demand in units Probability

20 0.20

30 0.55

40 0.25

The actual demand in one week does not affect the actual demand in the following week. Assume no seasonal variations in demand.

Required

a) Using the Expected value decision rule, if the owner is to order a fixed quantity of magazines per week, how many should he order?