# Question

## Step 2: Creating the Demand Probability Distribution

`Demand Probability1       0.0002       0.0013       0.0104       0.0295       0.0536       0.0747       0.0908       0.0989       0.09910      0.09411      0.08512      0.07413      0.06214      0.05115      0.04116      0.03217      0.025`

## Step 3: Calculating the Number of Fills

`Demand Probability1       0.0002       0.0013       0.0104       0.0295       0.0536       0.0747       0.0908       0.0989       0.09910      0.09411      0.085`

## Step 4: Calculating Profit

`5.25 * 20,000 = \$105,000 `
`6.06 * 20,000 = \$121,200`
`6.06-5.25 * 20,000 = 0.81 * 20,000 = \$16,200 `

## Step 5: Calculating Average Inventory Levels

`initialStockingLevel / (leadTimeDemand+1);`
`(initialStockingLevel - leadTimeDemand) + 0.5; `

## Step 6: Calculating Inventory Cost

`0.92 * 700/365 * 0.12 * 20,000`
`1.92 * 700/365 * 0.12 * 20,000`

## Step 7: Comparing Marginal Profit to Marginal Inventory Cost

`\$16,200 - \$4,602.74 = \$11,597.26`

## Summary

Founder of Firefly Semantics Corporation

## More from Ole Ersoy

Founder of Firefly Semantics Corporation