Compute probability of a stockout for the order quantities

Reference no: EM133102384

Case (attached): Specialty Toys, Inc. (Specialty), sells a variety of new and innovative children's toys. Management learned that the pre-holiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with good market potential, it chooses an October market entry date.

Managerial Report Prepare a managerial report that addresses the following issues and recommends an order quantity for the Weather Teddy product.

Part 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.

Part 2. Compute the probability of a stockout for the order quantities suggested by members of the management team.

Part 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.

Part 4. One of Specialty's managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stockouts. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

Part 5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation.

Examine any ethical issues that may arise when performing statistics.

Attachment:- Case.rar

Reference no: EM133102384

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