You are the buyer for your university bookstore. One of the textbooks has a cost to you of $104 and you sell it to students for $208. In this case, however, you cannot salvage any value from copies that do not sell because a new edition is published every semester. Demand for this text averages 100 copies each semester, with a standard deviation of 10 copies.

Question

You are the buyer for your university bookstore. One of the textbooks has a cost to you of $104 and you sell it to students for $208. In this case, however, you cannot salvage any value from copies that do not sell because a new edition is published every semester. Demand for this text averages 100 copies each semester, with a standard deviation of 10 copies.
 
  How many should you order each semester?

Elizabeth Afton · Answer

Step 1 of 3 Step-1: Calculate the cost of a stockout (Cso) of the item using the following formula as shown below: Cost of a stockout ( C so ) of the item is $40.