Question

Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. The anticipated demand is normally distributed with a mean of = 100 and a standard deviation of = 40. Each unit costs $150 to manufacture and the introductory price is to be $200 to achieve this level of sales. Any unsold units at the end of the season are unlikely to be very valuable and will be disposed off in a fire sale for $50 each. It costs $20 to hold a unit in inventory for the entire season.

1.How many units should Green Thumb manufacture for sale?

2. What is the expected profit from this policy?

Answer 1