Question

A bookstore must decide on how many calendars to order for the next year. Each calendar costs $2 and is sold for $4.50. After January 1, any unsold calendars are returned to the publisher for a refund of $0.75 each. The distribution of demand is uniform between 100 and 300. How many calendars should the bookstore order? (Show all equations and calculations.)

Answer 1

Answer: The book store should order 200 calendar to maximise his profit.

Step-by-step explanation:

Since we have given that

Profit on selling calendar is given by

$\ 4.50-\ 2\\\\=\ 2.50$

Loss on selling calendar is given by

$\ 2.00-\ 0.75\\\\=\ 1.25$

Expected sales would be

$\dfrac{100+300}{2}=\dfrac{400}{2}=200$

so, expected profit on 200 sales would be

$200\times \ 2.50\\\\=\ 500$

It is the maximum profit he can get.

So, the book store should order 200 calendar to maximise his profit.