Order quantity and profits

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Reference no: EM132295025

Case: Order quantity and profits

Part A) For a company the forecasted demand for coats during the winter season assumes a uniform distribution between [14000, 51000]. The coats are manufactured in Russia with a delivery price of $250 per unit. The company sell these coats for $325 wholesale to retailers. Production has to be ordered from Russia before demand information is known. Any unsold coat at the end of the sales season, is worthless. How much should the company order from Russia? What are they expected to sales? And what is their expected profit from the season?

Part B) Demand is still between [14,000, 51,000] with $250 per unit delivery price and sales price of $325. However, at the end of the regular season any unsold coat can be sold at a discount of their original purchase price at $225 per coat. How does this salvage possibility alter the company’s order quantity from Russia? What is the amount of expected profit? We still assume the demand follow Uniform distribution.

Part C) Now we assume that the company has the opportunity to use an English firm in additional to the Russia supplier to manufacture the coats. English production is more expensive, at a unit cost of $290 per coat, but it is also more responsive. With English production, replenishment orders can be made throughout the sales season and eliminates any possibility of lost sales. We still assume uniform distribution, demand between [14,000, 51,000], $325 sales price, and $250 delivery price from Russia, and $225 salvage value. How does this opportunity alter the company’s order quantity from Russia? What are the potential new challenges with this new operation comparing to part A & B?

Reference no: EM132295025

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