Fashion apparel and accessories chain store

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Nara is a fashion apparel and accessories chain store that procures a line of new shorts at $10 each from its European supplier. Unfortunately, at the time of order placement, demand is still unknown. Nara forecasts that its demand is normally distributed with mean of 2100 and a standard deviation of 1200 units. Nara sells these shorts at $22 each. Unsold shorts have little salvage values and they would be donated to charity. Based on this information:

How many shorts should Nara buy from its supplier to maximize expected profit?

If Nara wants to ensure a 98.5% in-stock probability, how many shorts should it order?

Suppose Nara decided that the donations of unsold shorts actually had a positive material effect on the company in the form of public goodwill. If this goodwill is estimated to be about $3 per donated item, how many shorts should Nara buy from its supplier to maximize expected profit?

Reference no: EM131433894

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