What is the per-item cost of overestimating demand

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Reference no: EM132230919

Let us consider a buyer for a department store who is ordering fashion swimwear about 6 months before the summer season. The store plans to hold an August clearance sale to sell any surplus goods by July 31. Each piece costs $43 per pair and sells for $65 per pair. At the sale price of $33 per pair, it is expected that any remaining stock can be sold during the August sale. We will assume that a uniform probability distribution ranging from 360 to 650 items describes the demand. The expected demand is 505 and the standard deviation of demand is 45. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

1. What is the per-item cost of overestimating demand? Round your answer to the nearest cent. $

2. What is the per-item cost of underestimating demand? Round your answer to the nearest cent.

3. What is the probability that the value of demand is lower than the optimal order quantity? Enter your answer as a decimal, not a percentage. Round your answer to two decimal places.

4. If the demand distribution is uniform what is the optimal order quantity? Round your answer to the nearest whole number. items

5. If the demand distribution is normal what is the optimal order quantity? Round your answer to the nearest whole number. items

Reference no: EM132230919

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