Answer:
$38,029
Explanation:
Sales of p = $35
Costs w = $5.00 (Production)
Assumption →v = 0 B = p‑w = 35‑5 = 30
C = w‑v = 5
Prob(D £ Q*) = SL*= B/(B+C) = 30/(30+5) = 0.8571
The z‑value matching to 0.8571 is 1.068 using the normal distribution table
Therefore the total demand for 2 years (D): Mean of m = 2 ×16,000 = 32,000
Standard Deviation (square root(2)X 4000= 5,657
Optimal Order Quantity (Q*)= m + zs =
$32,000 + 1.068×5,657 = $38,039