question archive A retail store in Hanes Mall purchases computer software from a distributor for resale
Subject:ManagementPrice: Bought3
A retail store in Hanes Mall purchases computer software from a distributor for resale. For an upcoming promotion, the retailer needs to determine the best order size for a one-time purchase. One of the products is a word processing program that will have a special sale price of $350. The retailer estimates the following demand schedule:
Demand Probability
50 0.1
55 0.2
60 0.2
65 0.3
70 0.15
75 0.05
Consider the following change made by the distributor. In order to reduce its risk, the distributor would refund $200 back to the store for only 80% of the returned items. For the remaining 20% of the returned items, the restocking charge is 40%, that is, the distributor would only return $150 to the store. Re solve the question to find the new optimal order quantity for the retailer and the new expected optimal profit.