A retail store sells a seasonal product for $10 per unit. The cost to the store is $6 per unit.

An end-of-season sale is required for all excess units that are sold at half price. Assume that demand for the units is normal with mean of 500 and standard deviation of 100.

a. What is the recommended order quantity?

b. What is the probability that at least some customers will ask to purchase the product after the outlet is sold out, assuming you use the order quantity recommended in (a)?

c. What is the effect of reducing the standard deviation of demand to 75 (through improved forecasting or through the use of early demand information from some customers)?? Lp852