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Question
A buyer for a department store orders sweaters about 6 months before the winter season. The store plans to hold a March clearance sale to sell any surplus goods by February 29. Each piece costs $100 per pair and sells for $120 per pair. At the sale price of $60 per pair, it is expected that any remaining stock can be sold during the March sale. Assume that a uniform probability distribution ranging from 250 to 450 items describes the demand. The expected demand is 300. In the context of the single period inventory system, the optimal order size Q must satisfy the condition _____.
a. P(demand ≤ Q*) = 1/2
b. P(demand ≤ Q*) = 1/3
c. P(demand ≤ Q*) = 1/4
d. P(demand ≤ Q*) = 1/5
Answer
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