The demand for a product of Carolina Industries varies greatly from month to month. Based on the past two years of data, the following probability distribution shows the companys monthly demand: Unit Demand Probability 300 ........0.20 400 ........0.30 500 ........0.35 600 ........0.15 a. If the company places monthly orders equal to the expected value of the monthly demand, what should

Chapter 3, Problems #7

The demand for a product of Carolina Industries varies greatly from month to month. Based on the past two years of data, the following probability distribution shows the company’s monthly demand:

Unit Demand Probability

300 ........0.20

400 ........0.30

500 ........0.35

600 ........0.15

a. If the company places monthly orders equal to the expected value of the monthly demand, what should Carolina’s monthly order quantity be for this product?

b. Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or lose in a month if it places an order based on your answer to part a and the actual demand for the item is 300 units?

c. What are the variance and the standard deviation for the number of units demanded?

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...