Question

9. value: 8.00 points PA 13-6 To ensure a full line of outdoor clothing and accessories, the. Use Table 13.4 To ensure a full line of outdoor clothing and accessories, the marketing department at Teddy Bower insists that they also sell waterproof hunting boots. Unfortunately, Teddy Bower does not have expertise in manufacturing those kinds of boots. Hence, Teddy Bower contacted several Taiwanese suppliers to request quotes. Due to competition, Teddy Bower knows that it cannot sell these boots for more than $52. However, $40 per boot was the best cost quote from the suppliers. In addition, Teddy Bower anticipates excess inventory can only be sold (salvaged) for 40% of its original price at the end of the season. Given the $52 price, Teddy Bower's demand forecast is for 375 boots, with a If a part of the question specifies whether to use Table 13.4, or to use Excel, then credit for a correct answer will depend on using the specified method. If Teddy Bower decides to include these boots in its assortment, how many boots a. should Teddy Bower order from the supplier? Use Table 13.4 and the round-up rule. Suppose Teddy Bower orders 360 boots. What is Teddy Bower's expected profit? b. Use Table 13.4 and the round-up rule. (Round your answer to 2 decimal places.) The marketing department insists that their in-stock probability be at least 98%. Given this mandate, how many boots do they need to order? Use Table 13.4. John Briggs, a buyer in the procurement department, overheard at lunch a discussion of the "boot problem". He suggested that Teddy Bower ask for a quantity discount from the supplier. After following up on his suggestion, the supplier d. responded that Teddy Bower could get a 10% discount if they were willing to order at least 775 boots. If the objective is to maximize expected profit, how many boots should Teddy Bower order given this new offer? Use Table 13.4 and the round-up rule.

Answer 1

Teddy Bower Mean demand, p 375 Standard deviation of demand, a 277 $ 52.00 $ 40.00 $ 20.80 Selling price, s Cost price, c Salvage value, b =52*0.4 40% =52 - 40 =40 - 20.8 =Selling price - Cost price =Cost price - Salvage value Underage penalty, Cu Overage penalty, Co Critical ratio, F(z) Standard Normal Variate, z 12.00 19.20 =Cu / (Co + Cu) 0.3846 refer F(z)=0.3846 in table 13.4 -0.3000 a) Optimal Order Quantity, Q =u + z*o 292 Given order quantity, Q Standard Normal Variate, z 360 =(Q-µ)/o =(360 - 375)/277 refer z= 0 in table 13.4 -0.0542 Ц-) =o*I(z) =Q - V =s*Cu - V*Co 0.3989 Expected Left Over Inventory, V 110.50 Expected Sales, S 249.50 b) Expected profit 872.55 Target in-stock, F(2) 98% refer F(z)>=0.98 in table 13.4 =NORMSINV(S) 2.10 %3! c) Optimal order quantity, Q 957 u + z*o $ 52.00 $ 36.00 $ 20.80 Selling price, s Discounted cost price, c =40*(1-0.1) Salvage value, b Underage penalty, Cu =52 - 36 Overage penalty, Co =36 - 20.8 10% 16.00 15.20 Required order quantity, Q 775 =(775 - 375)/277 Standard Normal Variate, z =(Q-µ)/o 1.4440 I(2) refer z=1.5 in table 13.4 1.5293 Expected Left Over Inventory, V =o*I(z) Expected Sales, s =Q - V =s*Cu - V*Co 423.62 351.38 Expected profit -816.82 This expected profit is lesser than that calculated in (b). d) Therefore, Teddy Bower should order 292 boots I| || |I I| || || I| || || I||| I| || || I| ||