Question

Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. Each unit costs $150 to manufacture, and the introductory price is $200. At this price, the anticipated demand is distributed as shown in table below. Any unsold units at the end of the season will be disposed of in a post-season sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the expected profit from this policy? (assume that Green Thumb can only manufacture in multiples of 10.)

Probability pi	Demand Di
0.01	83
0.02	75
0.04	114
0.08	68
0.09	180
0.11	72
0.16	76
0.20	177
0.11	109
0.10	70
0.04	152
0.02	40
0.01	168
0.01	52

Answer 1