Josh sells Sunday papers outside a retirement home on Sunday mornings.
The daily demand for his newspapers
is normally distributed with an expected demand of 100 and a standard deviation of 20.
Josh collects $1.75 per paper and pays $0.98 for a paper. The retirement home residents think fondly of Josh and aren't too upset when papers run out.
On the other hand, any papers Josh is left with are thrown into the recycling bin. In other words, when Josh runs out of papers, the sale is lost.
Josh is trying to figure out a systematic ordering policy.
What is Josh's optimal (profit-maximizing) order quantity for this situation?