Question
The University Co-op store sells official University calendars every year. The calendars have to be ordered in October of the previous year and at that
The University Co-op store sells official University calendars every year. The calendars have to be ordered in October of the previous year and at that time, demand is uncertain. The store estimates that that demand for University calendars has a normal distribution with mean 500 and standard deviation 150. The calendars are bought from a supplier at $3 a piece and sold in the store for $15 a piece. If by January 15 some official calendars are left unsold, they are shredded by a recycling firm who charges 50 cents per calendar they have to shred. If University students come to the store wanting to buy an official University calendar but the Co-op has run out, the store quickly prints an unofficial University calendar using their black and white printer. These unofficial University calendars are not as nice as the official ones and are sold for only $2 and cost 10 cents to make. Assume that every student who wanted to buy an official University calendar but could not get one accepts to buy an unofficial one instead and that no one buys the unofficial calendar when there are still some official ones in stock. Finally assume no student wants to buy a calendar after January 15. What is the underage cost and overage cost for official calendars? How many official University calendars would you recommend the Co-op orders in October?
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