Order quantity and demand uncertainty

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Reference no: EM132134523

Tango’s Kiosk needs to decide how many pretzels to order for Spring Carnival. The pretzels cost $0.10 each and sell for $0.25 each; unsold pretzels can be returned to the supplier for a $0.05 each refund (the supplier then sells them in its Day Old Shopper for $0.08 each). Demand is estimated to be normal with a mean of 500 and standard deviation of 100.

a. How many pretzels should they order?

b. Suppose demand has standard deviation of 200. How many pretzels should be ordered now? What can you say about the relationship between order quantity and demand uncertainty (standard deviation)?

Reference no: EM132134523

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