In august 211 a car dealer is trying to determine how many 2012 models should be ordered. Each car costs the dealer $20,000. The demand for the dealer's 2012 models has the probability distribution shown in table 1. Each car is sold for $30,000. If the demand for 2012 cars exceeds the number of cars ordered in August, the dealer must reorder at a cost of $24,000 per car. If the demand for 2012 are falls short, the dealer may dispose of excess cars in an end-of-model-year sale for $18,000 per car.

1. What Kind of inventory model can be adopted in this decision problem?

Table 1

No. of cars Demand

20

25

30

35

40

Probability

.30

.15

.15

.20

.20