Question: Top gun Records has signed a revenue- sharing contract with a movie studio for CDs. Each CD costs the studio $2 to produce. the CD will be sold to Top gun for $3. Top gun in turn prices a CD at SI 5 and forecasts demand to be normally distributed, with a mean of 5.000 and standard deviation of 2,000. Any unsold CDs are discounted to $1. and all sell at this price. Top gun will share 35 percent of the revenue with the studio, keeping 65 percent for itself.
How many CDs should Top gun order?
How many CDs does Top gun expect to sell at a discount?
What is the profit that Top gun expects to make?
What is the profit that the studio expects to make?