A movie studio sells a movie on DVD to VideosRUs at $10 per DVD. The marginal production cost for the movie studio is $1 per DVD. VideosRUs prices each DVD at $19.99 to its customers. DVDs are kept on a regular rack for a one-month period, after which any unsold DVD is sold back to the movie studio at a price of S4.99 (per DVD) The studio in turn, can sell the returned DVDs for a salvage value of $2.5 (per DVD) VideosRUs places a single order for DVDs. Its current forecast is that sales will be normally distributed with a mean of 10,000 and a standard deviation of 5,000.
a- What should be the target CSL for VideosRUs?
b- How many DVDs should VideosRUs order?