25. The manager of the boutique has to decide how many luxury gift packs of cosmetics to buy for the forthcoming Diwali season. The gift packs have to be bought from a manufacturer in cases of 50. The profit per pack is Rs 20. On the basis of trading conditions last Diwali, the current economic conditions and competitive market factors, the manager's estimate of the sales of this gift pack this season is as follows:

Any unsatisfied demand does not affect the probability of future sales. Any unsold packs will be sold after Diwali at a loss of Rs 10 per pack.

(a) Assuming that the quantity of stock is bought in units of 5 cases and ignoring storage costs, how many cases should the manager buy to maximise her expected profit?

(b) If the manager was completely uncertain about the likelihood of sales between 5 and 25 cases (inclusive), how many cases should she stock?

Transcribed Image Text:

5 10 15 20 25 : 0.20 0.20 0.30 0.20 0.10 Sales (Cases): Probability