Toy company produces go-go-bunny for upcoming christmas

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Reference no: EM132232386

A toy company produces “Go-Go-Bunny” for the upcoming Christmas season. The production cost of the toy is $15 for the toy company. It will sell the toy to Wal-Mart at a wholesale price of $40. Wal-Mart will sell the toy at a retail price of $80. If any unsold toys, Wal-Mart will ship them to China to sell in the Chinese New Year season, but at a discount price of $40. But this incurs an additional $30 shipping fee for each toy shipped to China. The demand of Wal-Mart is estimated to be: Demand Probability 10,000 10% 12,000 30% 14,000 30% 16,000 30% Note that it can be calculated that the mean demand is 13,600.

a. How many toys should Wal-Mart order for the season?

b. On average, how many toys will be shipped to China after Christmas?

c. What is the expected profit for Wal-Mart? What is the profit for the toy company?

d. If the supply chain were coordinated, what would the optimal order quantity be? What would the total supply chain profit be?

e. Keeping the $40 wholesale price, the toy company proposes a buy-back contract with a buy-back price $28. The toy company also sells unsold toys (bought back from Wal-Mart if any) in the Chinese New Year season at a discount price of $40, by incurring a $30 shipping fee. How many toys should Wal-Mart order for the season? What is the expected profit for Wal-Mart? What is the profit for the toy company?

f. If both parties agree on a revenue-sharing contract, in which the wholesale price is reduced to $30, and the Wal-Mart would give the toy company 10% of its revenue for all toys sold, what is the expected profit of the toy company in such a deal? Please write your answers below. Upload your work after you finish the exam.

Reference no: EM132232386

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