A retailer needs to choose the inventory level for the coming season. The retailer estimates the demand will have a 40% chance to be 60, 40% chance to be 40, and 20% chance to be 20. The ordering cost is $5 for each unit. The retail price is $20. For each unit of surplus inventory, the salvage value is $2. The penalty cost for each unit of unmet demand is $3. There are only two feasible ordering strategy: 50 or 45.

Q1. Use decision true to analyze which ordering strategy is more beneficial to the retailer.

Q2. Prove that ANY quantity 20cannot be the best inventory decision.