A Classic “Newsboy” Problem

Your store is selling calendars, which cost you $6.00 and sell for $11.99.

You cannot predict demand for the calendars with certainty. Data from previous years suggest that demand is well described by a “Poisson” random variable with mean value 70 (Note: we’ll discuss exactly what that means in increasing detail over the next few weeks.)

Calendars which remain unsold after January are returned to the publisher for a $3.00 “salvage” credit.

There is only one opportunity to order the calendars. What is the right number of calendars to order?