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Fri 20 Jun, 2008 06:39 pm
I need help please! This is the last homework problem I have. Does anyone have any idea?
Members of a management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantities suggested indicate considerable disagreement concerning the market potential. the product management team asks you for an analysis of the stock-out probabilites for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation. Specialty (the company name) expects to sell Weather Teddy (the product) for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similiar products, Specialty's senior sales forecaster predicted an expected demand of 20,000 units with a 0.95 probability that demand would be between 10,000 units and 30,000 units.
1. Use the sales forecaster's prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.
5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation.