The profit-maximizing service level for rental snowshoes

Assignment Help Operation Management

Reference no: EM132193421

1. Assume the following when determining the right stock level for snowshoes.

1) Assume weekly demand is normally distributed with mean 9 and standard deviation 3.

2) There are 26 rental opportunities in a season. Snow shoes are rented for $40

3) The average lifespan of snowshoes is 5 years

4) REI charges a 67% markup, meaning the $200 retail price implies that the purchase price for REI is 200/1.67 = $1.20

2. What is the cost of having a pair of snow shoes go unrented for a weekend of their useful life? (Think overage)

A) $4.82

B) $0.82

C) $0.92

D) $9.92

3. What is the "cost" of not having a snowshoe that someone can rent (ignore that the person might instead buy a snowshoe and just focus on lost rental revenue).

A) $44

B) $32

C) $40

D) $120

4. What is the profit-maximizing service level for rental snowshoes?

A) .911

B) .879

C) .978

D) .789

5. How many rental snowshoes should they stock?

A) 10

B) 17

C) 15

D) 13

Reference no: EM132193421

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