Question

Dan McClure owns a thriving independent bookstore in artsy New Hope, Pennsylvania. He must decide how many copies to order of a new book, Power and Self-Destruction, an exposé on a famous politician’s lurid affairs. Interest in the book will be intense at first and then fizzle quickly as attention turns to other celebrities. The book’s retail price is $20, and the wholesale price is $12. The publisher will buy back the retailer’s leftover copies at a full refund, but McClure Books incurs $4 in shipping and handling costs for each book returned to the publisher. Dan believes his demand forecast can be represented by a normal distribution with a mean of 200 and a standard deviation of 80.

Round your answer to 2 digits after the decimal point if it is not an integer. Do NOT use comma in your numeric answers.

Dan will consider this book to be a blockbuster for him if it sells more than 400 units. The probability that Power and Self-Destruction will be a blockbuster is ________%.

Dan considers a book a “dog” if it sells less than 50% of his mean forecast. The probability this exposé will be a “dog” is ________%.

The probability that demand for this book will be within plus and minus 20% range of the mean forecast is ______% .

The underage cost is $________. The overage cost is $_______. The critical ratio is ________. The order quantity that maximizes Dan’s expected profit is ________ copies

In order to achieve a 95% in-stock probability, Dan needs to order ________ copies of the book

If Dan achieves a 95% in-stock probability, then the probability that some customer won’t be able to purchase a copy of the book will be ________%.

Suppose Dan orders 300 copies of the book. Dan’s expected leftover inventory will be _________ copies, expected sales will be __________ copies, and expected profit will be $___________.

Answer 1

Dan McClure owns a thriving independent bookstore in artsy New Hope, Pennsylvania. He must decide how many copies to order of a new book, Power and Self-Destruction, an exposé on a famous politician’s lurid affairs. Interest in the book will be intense at first and then fizzle quickly as attention turns to other celebrities. The book’s retail price is $20, and the wholesale price is $12. The publisher will buy back the retailer’s leftover copies at a full refund, but McClure Books incurs $4 in shipping and handling costs for each book returned to the publisher. Dan believes his demand forecast can be represented by a normal distribution with a mean of 200 and a standard deviation of 80.

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