Assignment:
A firm sells a perishable product, with a time window for sales limited to 1 month. The product is ordered once per month, and the delivery lead time is very small, so that the useful shelf life is really 1 month. Each piece is bought at €10 and its sold for €14; if the product expires, it can be scrapped for €2 per unit. Over the last 4 months a positive trend in sales has been observed:
Month Jan Feb Mar Apr
Sales 102 109 123 135
Hence, the firm resorts to linear regression to forecast sales over the next period. How many items should the firm buy, in order to maximize expected profit in May?
Provide complete and step by step solution for the question and show calculations and use formulas.