Service Management 7th Edition by James Fitzsimmons, Mona Fitzsimmons

Exercise 8

The J B Card Shop sells calendars with different coral reef pictures shown for each month. The once-a-year order for each year's calendar arrives in September. From past experience, the September-to-July demand for these calendars can be approximated by a normal distribution with mean of 500 and standard deviation of 120. The calendars cost $1.50 each, and J B sells them for $3 each.
a. If J B throws out all unsold calendars at the end of July (i.e., salvage value is zero), how many calendars should be ordered?
b. If J B reduces the calendar price to $1 at the end of July and can sell all surplus calendars at this price, how many calendars should be ordered?