Although its derivation in the appendix is for the case of continuous units, Equation 9.3 also holds for the case of discrete demand and units where ES =

x0>Q(x0 −Q)px(x0).a. For an item with the following data, compute the expected profit from Equation 9.3 for Q equal to each possible (nonzero probability) value of x and thus find the best Q value. Verify that the use of Equation 9.10-.-

gives the same result.

Number of Units, x0 1 2 3 Total px(x0) = Pr(x = x0) 0.25-.-

0.4 0.35 1

px < (x0) = Pr(x < x0) 0 0.25 0.65 1 p = $10 v = $5 g = $1 B = $1

b. Prove analytically that Equation 9.3 holds, in general, for discrete demand units.? Lp852