Dan's Independent Book Store is trying to decide 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?

Dan's Independent Book Store is trying to decide 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?

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Description: Dan's Independent Book Store is trying to decide 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 copie

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter10: Introduction To Simulation Modeling

Section: Chapter Questions

Problem 36P: Dilberts Department Store is trying to determine how many Hanson T-shirts to order. Currently the...

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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 for $28.00. The publisher sells the book to Dan at $20.00. Dan can 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. Question 1: What is the quantity that Dan should order to maximize his expected profit?
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