How many calendars should order


Response to the following problem:

It is October 15, and Furr's Stationary must decide how many calendars it should order from the World Wildlife Federation. The calendars cost the company $4.25, and Furr's sells them for $9.50. The calendars will arrive on November 1, and demand during the period between November 1 and Christmas is estimated to follow a normal distribution with a mean of 250 units and a standard deviation of 40 units. Any calendars that remain after Christmas will be marked down to $2.00 and sold at Furr's annual after Christmas sale. If Furr's runs out of calendars before Christmas, it estimates it suffers a goodwill cost of $1.50 for each calendar demanded when it is out of stock. If Furr's can only place one order for the calendars and there is a $ 20 cost of placing an order, determine:

a. How many calendars it should order.

b. The expected profit it will earn on the calendars.

 

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Cost Accounting: How many calendars should order
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