1. The Gigantic Pocket Monster (Gipokmon) is a new toy that Mattel has introduced. Mattel currently allows toy retailers to place an order in August for delivery in November for the holiday season. It costs Mattel $1.50 to manufacture and ship each Gipokmon. Mattel charges a wholesale price of $10. The Toys R Us manager plans to sell the toy for $20. The end-customer demand for this toy is estimated to be 11000 units with a probability of 0.4, and 8000 units with a probability of 0.6.

   (a) How many units should Toys R Us order to maximize its expected profit? What is the resulting profit for Mattel, Toys R Us, and the supply chain, respectively?

   (b) Suppose now Mattel buys back unsold Gipokmon for $4 per unit. Please answer again the questions in (a).