Question
The demand for a product of a company varies greatly from month to month. The probability distribution in the following table, based on the past
The demand for a product of a company varies greatly from month to month. The probability distribution in the following table, based on the past 2 years of data, shows the company's monthly demand:
Unit demand | 300 | 400 | 500 | 600 |
Probability | 0.20 | 0.30 | 0.35 | 0.15 |
(i) If the company bases monthly orders on the expected value of the monthly demand, what should the monthly order quantity be for this product? (ii) Assume that each unit demanded generates Tk.70 in revenue and that each unit ordered costs Tk.50. How much will the company gain or loss in a month if it places an order based on your answer to part (i) and the actual demand for the item is 300 units?
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