Purchase at the start of the upcoming selling season

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Dan's Independent Book Store is trying to decide on how many copies of a book to purchase at the start of the upcoming selling season.  The book retails at $28.00. The publisher sells the book to Dan at $20.00.  Dan will dispose of all of the unsold copies of the book at 50% off the retail price, at the end of the season.  Dan estimates that demand for this book during the season is Normal with a mean of 1000 and a standard deviation of 250. 

 The publisher is thinking of offering the following scheme to Dan.  At the end of the season, they will buy back unsold copies at a pre-determined price of $17.00. However, Dan would have to bear the costs of shipping unsold copies back to the publisher at $1.00 per copy. What is the quantity that Dan should order, to maximize his expected profits?

 

 

Reference no: EM13787665

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