1.
The units of products which Green should stock is the average demand, which is equal to
Where D is the demand and P is the probability.
=100 x 0.2 + 200 x 0.3 +300 x 0.2 + 400 x 0.3
= 20+ 60+ 60+ 120
=260
Profits for Whole = Sale - Cost
Cost price = $ 10 per unit
Selling price = $15 per unit
Profit per unit = $15-1$0
= $5
Thus net profit = number of units sold x profit per unit
= 260 x 5
=$1300
Profits of Green
Whenever there is a demand profit per unit is $45 - $15 which is selling price - purchase price
=$30
Whenever there is no demand and leftover inventory
there will be a loss of $15 or profit of -$15
So,
When actual demand is 100, leftover inventory = 260-100 = 160 units
when actual demand is 200, leftover inventory = 260-200 = 60 units
When actual demand is 300, leftover inventory NIL
when actual demand is 400, leftover inventory NIL
So the net profits would be
(30x100 -15x160)x0.2 + (30x200 -15x60)x0.3 + (30x260 -15x0)x0.2 + (30x260 -15x0)x0.3
=120 + 1530 + 1560 + 2340
= $5,550
Total Supply chain profit = profit of Green + profit of Whole
= 5,550 + 1,300
=$6,850
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