Hall mark sells "personal expression" cards and gifts wrorldwride through either its own stores or other retailers. Most products are single runs. Unsold products are either discounted and sold to discount retailers, or are discarded.
A typical problem Hallmark faces is as follows: A Barbie Stationary Gift set, containing 16 notes, envelopes, and foil seals, is to be produced and marketed to celebrate the 50th year of Barbie. The price will be set at $12.99 per unit. The cost of production to Hallmark will be approximately $6 per unit. The product manager, based on previous sales of Barbie stationery products, estimates that demand and its probability for this product will be as follows:

Any units not sold through regular channels will be sold to discount retailers at $1 less titan cost (i.e., $5 per unit). There is no penalty' cost for being short. Determine the optimal order quantity' for the Barbie Stationery' Gift set.97

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Demand (in 1000s) Probability 100 2 110 .4 120 .2 130