Example 1: The J&B Card Shop sells calendars.

The once-a-year order for each year’s

calendar arrives in September. The calendars cost $1.50 and J&B sells them for $3
each. At the end of July, J&B reduces the calendar price to $1 and can sell all the
surplus calendars at this price. How many calendars should J&B order if the
September-to-July demand can be approximated by
a. uniform distribution between 150 and 850

Solution:
Loss resulting from the items unsold
ML= Purchase price - Salvage value =
Profit resulting from the items sold
MP= Selling price - Purchase price =
Example 2: The J&B Card Shop sells calendars. The once-a-year order for each year’s
calendar arrives in September. The calendars cost $1.50 and J&B sells them for $3
each. At the end of July, J&B reduces the calendar price to $1 and can sell all the
surplus calendars at this price. How many calendars should J&B order if the
September-to-July demand can be approximated by
b. normal distribution with  = 500 and =120.