Answer: 1,750,000
Step-by-step explanation:
From the question, the cost per unit for the underestimated demand is given as: $25 - $10 = $15; while for the overestimated demand is given as $5.
The probability of optimal production will be calculated as:
= 15/(15+5)
= 15/20
= 3/4
= 0.75
The optimal production will then be:
= (2,000,000 - 1,000,000) × 0.75 + 1,000,000
= (1,000,000 × 0.75) + 1,000,000
= 750,000 + 1,000,000
= 1,750,000
The number of hardcovers produced is 1,750,000