Tom is in the business of selling a daily newspaper. The unit purchasing cost of a newspaper is $2.0. Tom sells the newspapers to the customers for a price of $4.0. If there are leftovers at the end of day, it can be sold to a recycling firm at $1.0 per paper. The probability distribution of demand for a given day is as follows:

Demand	300	400	500	550	600	700	800
Probability	0.25	0.15	0.15	0.11	0.14	0.10	0.10

What are C_u and C_o?

If we increase order quantity from 500 to 501, by how much will the expected profit change?

What is the optimal order size which maximizes the expected profit?

Assuming Tom buys 400 copies of the newspaper. Calculate the expected profit. Use the table below for the calculations.

Demand	#Units sold	#units leftover	Revenue from #units sold	Salvage from #units leftover	Total cash inflow	Probability
300						0.25
400						0.15
500						0.15
550						0.11
600						0.14
700						0.10
800						0.10