The daily demand for a product in a shop can assume one of the following values: 100, 120, or 130 items with probabilities 0.2, 0.3 and 0.5. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 55 cents per item. Assume that the owner pays 60 cents per item and sells it for 100 cents, find the optimal stock level.

The daily demand for a product in a shop can assume one of the following values: 100, 120, or 130 items with probabilities 0.2, 0.3 and 0.5. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 55 cents per item. Assume that the owner pays 60 cents per item and sells it for 100 cents, find the optimal stock level.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 47P

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