For the E-commerce company, given that

Retail Price=$140,

Cost Price =Vender’s Wholesale Price=$70

Under Buyback, Salvage=$50

Cost of overordering i.e., Overage Cost, Costover=Cost Price-Salvage=70-50=$20

Cost of underordering i.e., Underage Cost, Costunder= Retail Price-Cost Price=140-70=$70

Critical Ratio for retailer or Probability for the retailer

For optimal order, we must have cumulative probability, P(Demand <= Optimal Order Quantity)=0.778

Thus, to find the optimal solution, let us develop cumulative probability distribution of demand as below:

Demand 8000 10000 12000

Probability 0.23 0.46 0.31
Cumulative Probability 0.23 0.69 1

P(Demand <= Order Quantity)

Since P(Demand <= Optimal Order Quantity)=0.778 is lies between 0.69 and 1. Thus the Optimal Order
Quantity for the E-commerce company would be 12000.

Optimal Order Quantity=1000

Optimal Order Quantity=1000

Semicon is a start-up company that produces semiconductors for a variety of applications. The process of
burning in the circuits requires large amounts of nitric acid, which has a shelf life of only three months.
Semicon estimates that it will need between 1,000 and 3,000 gallons of acid for the next three-month period
and assumes that all values in this interval are equally likely. The acid costs them $150 per gallon. The
company assumes a 30 percent annual interest rate for the money it has invested in inventory, and the acid
costs the company $35 a gallon to store. (Assume that all inventory costs are attached t