Finding optimal weekly candle purchase quantity with uncertain demand

[intern3t]

I tried working on this question:

the cost of unit for candle is $ 25, selling price $ 30 per item if sold within a week.

unsold to be disposed $20

weekly sales: 3 4 5 6 7 8
probability: 0 10 20 40 30 0

Determine the optimum number of items per week that should be bought by the business owner.

and i got 3, didn't really understood the question. Please help. thanks

 

[I like Serena]

I tried working on this question:

the cost of unit for candle is $ 25, selling price $ 30 per item if sold within a week.

unsold to be disposed $20

weekly sales: 3 4 5 6 7 8
probability: 0 10 20 40 30 0

Determine the optimum number of items per week that should be bought by the business owner.

and i got 3, didn't really understood the question. Please help. thanks

Hi intern3t,

Suppose we buy 5 candles and sell 4.
Then our cost is $5\times \$25$ and we gain $4 \times \$30$, leaving us 1 candle that we dispose for $1 \times \$20$.

So our profit is:
$$\text{Profit} = \text{Revenue} - \text{Cost} = 4\times \$30 + 1\times \$20 - 5\times \$25 = \$15$$

Can you deduce what the profit is if we still buy 5 candles, but could sell 3, 5, respectively 6 candles?

What do you know about calculating an expectation from that?