The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40.They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each.All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each.How many elementary statistics books should the campus bookstore stock for sale to students?
A)210
B)224
C)250
D)264

Question

Quizplus · Accepted Answer

To maximize profit, the bookstore should stock the number of books that corresponds to the expected demand plus the safety stock. The safety stock can be calculated using the service level and the standard deviation of demand. However, without specific service level information, we aim to meet the mean demand to minimize the risk of overstocking and understocking. Therefore, stocking 264 books, which is closest to the mean demand of 250 plus a buffer, is a reasonable approach to cover the normal distribution of demand and ensure they meet the majority of it without specific service level or cost considerations provided.

The Campus Bookstore Knows from the Past Several Semesters That