Question: 1. Consider the following demand scenario: Probability Quantity 2,000 3% 2,100 8% 2,200 15% 2,300 30% 2,400 17% 2,500 12% 2,600 10% 2,700 5%

1. Consider the following demand scenario: Probability Quantity 2,000 3% 2,100 8%

1. Consider the following demand scenario: Probability Quantity 2,000 3% 2,100 8% 2,200 15% 2,300 30% 2,400 17% 2,500 12% 2,600 10% 2,700 5% Suppose the manufacturer produces at a cost of $20/unit and sells to the distributor at $40/unit. The distributor sells to end customers for $50/unit during season; unsold units are sold for $10/unit after season. (1) Assume the manufacturer will buy any unsold items at price $32/unit. What is the optimal order quantity? (2) What is the expected number of unsold items? (3) What is the profit for the distributor? (4) What is the profit for the supplier?

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