Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $25. Inventory is salvaged for $5. What is its maximum profit? $5000 $12,500 $7500 $8000

maximum profit = $7500

so correct option is c $7500

Explanation:

given data

mean = 500

standard deviation = 300

cost = $10

price = $25

Inventory salvaged = $5

to find out

What is its maximum profit

solution

we get here maximum profit that is express as

maximum profit = mean * (price - cost) ... 1

put here value in equation 1 we get maximum profit

maximum profit = mean * (price - cost)

maximum profit = 500 * ($25 - $10)

maximum profit = 500 * $15

maximum profit = $7500

so correct option is c $7500