For a given perishable product, a retailer pays $5 for each unit, then sells them for $10 each.
At the end of the day, units not sold at the store are disposed of, and the retailer receives just $1 for each. Given the following probability distribution describing daily demand, how many units should be stocked?
|
x
|
Prob. (Demand = x)
|
x
|
Prob. (Demand = x)
|
|
0
|
0.01
|
7
|
0.18
|
|
1
|
0.02
|
8
|
0.14
|
|
2
|
0.04
|
9
|
0.09
|
|
3
|
0.07
|
10
|
0.05
|
|
4
|
0.09
|
11
|
0.02
|
|
5
|
0.12
|
12
|
0.01
|
|
6
|
0.15
|
13
|
0.01
|