You have a one-time chance to purchase an item for $5. The item can be sold to

Question:

You have a one-time chance to purchase an item for $5. The item can be sold to customers for $30. After one day, the item has no salvage value because it becomes rotten at the end of the day. It will then cost you $15 to properly dispose of any unsold items. You think you can sell 1,000 units in one day, but also know that the standard deviation of demand for the item is 50 units. How many units should you order?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...