The WNE's bookstore is responsible to order and sell a new T-shirt for the coining academic year. The T-shirts cost $12 to make and distribute. However, the bookstore has no idea about the sell price, but they do NOT want the sell price to be less than $25. They also have no policy about the excess inventory. Normally, they discount the t-shirts by 40 percent. However, the t-shirts can be discounted up to 70 percent if necessary.
The students, alumni and staff are the potential buyers of the new t-shirts. They estimate annual demand at 1000, with a significant amount of uncertainty. Due to this uncertainty, the bookstore wants to order only 1500 shirts. In addition, the bookstore wants to place the order once at the beginning of the academic year. They have enough storage space.
What would be your recommendation for the order quantity?
What is your plan to maximize the expected profit?