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The ABC company sells another product SKU37. But this is a seasonal product only sold in the spring. seasonal deman is drawn from normal distribution with mean 100 and Standard Deviation 25. the selling price is $40 per unit and the Purchase cost is $10 per unit. All unsold units are destroyed at no cost.
1- What is the Optimal Order Quantity?
2- Suppose Frank informs you that he has heared about a new firm that for a fee of $100, will reduce the uncertainty in demand to a standard deviation of 10 unit. Should you tell Frank to hie this firm? why, why not? Please step by step
3- How much are you willing to pay to reduce the Standard deviation from 25 to 0 Zero.
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