Q8 Q12 are based on the problem below.

SCU bookstore is trying to decide on how many copies of a book to purchase at the start of the upcoming winter quarter. The book retails at $218.00. The publisher sells the book to SCU bookstore for $160.00. SCU bookstore will dispose of all of the unsold copies of the book at 60 percent off the retail price (i.e., 40% of the retail price) at the end of the quarter. SCU bookstore estimates that demand for this book during the quarter is normally distributed with a mean of 50 and a standard deviation of 15. The publishers variable cost per book is $100.

How many copies should SCU bookstore order to maximize its expected profit?

What is expected profit of the SCU bookstore by ordering the amount in Q1?

What is the expected profit of the supply chain when the SCU bookstore orders the amount in Q1?

What is the optimal order quantity that would maximize the supply chains profit? (Assuming the supply chain can still salvage the books at the same salvage value)

The publisher is thinking of offering the following contract to SCU bookstore. At the end of the quarter, the publisher will buy back unsold copies at a predetermined price. What price should the publisher pay SCU bookstore for returned books to maximize the supply chains profit (the sum of the publishers profit and SCU bookstores profit)? [Hint: Assume that the publisher can still salvage the books at the same salvage value after buy-backing the unsold books.]