Expected Sales Each unit of demand results in either a sale or a lost sale, so Expected sales + Expected lost sales = Expected demand We already know expected demand: It is the mean of the demand distribution, js. Rear- range terms in the above equation and we get Expected sales = y. — Expected lost salesExpected Leftover Inventory Expected leftover inventory is the average amount that demand (a random variable) is less than the order quantity (a fixed threshold). (In contrast, expected lost sales is the average amount by which demand exceeds the order quantity.) The following equation is true because every unit purchased is either sold or left over in inventory at the end of the season: Expected sales + Expected leftover inventory = Q Rearrange the above equation to obtain Expected leftover inventory = Q — Expected salesExpected Profit We earn Price — Cost on each unit sold and we lose Cost — Salvage value on each unit we do not sell, so our expected profit is Expected profit = [(Price — Cost) X Expected sales] —[(Cost — Salvage value) < Expected leftover inventory]Expected lost sales = o X L(z) o = Standard deviation of the normal distribution representing demand L(z) = Loss function with the standard normal distribution