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    Calculating optimal purchase amount.

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    The probability distribution for the demand of a product has been estimated to be:

    Demand Probability of Demand
    0 0.05
    1 0.15
    2 0.30
    3 0.35
    4 0.10
    5 0.05
    6 0.00
    1.00

    Each unit is purchased for $10 and each unit sells for $50. Unsold units are worthless (no scrap value).

    How many units should be purchased if no reordering is possible?

    © BrainMass Inc. brainmass.com October 10, 2019, 7:34 am ad1c9bdddf
    https://brainmass.com/business/inventory-management/calculating-optimal-purchase-amount-587268

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    Solution Summary

    This solution calculates the optimal purchase amount given the probability of demand and no reordering.

    $2.19