PLEASE INCLUDE WORK. The publisher is selling the book for $82.50 and Dan plans a 25% gross margin on this book, i.e., the price will be $110. Dan estimates that demand over the next year has a Poisson distribution with mean 2.5. At the end of the year Dan will sell left over books to a discounter and probably will only get 20% of the wholesale price for each copy.
Suppose Dan orders four copies of the poetry book. What is Dan’s expected sales?
How many copies of the poetry book should Dan order to maximize his expected profit?
How many copies of the poetry book should Dan order to ensure at least a 90% fill rate?