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Champion makes winter fleece jackets for sale in the United States. Each jacket sells for $60 and costs $30 to produce. Any leftover jackets at the end of the season are shipped to South America and sold for $40 per jacket. Holding a jacket until the end of the season costs $5.
Shipping to South America costs $5 per jacket.
a. What is the understocking cost?
b. What is the overstocking cost?
c. What is the optimal cycle service level (CSL)?
d. If the demand in the United States is estimated to be between 200,000 to 400,000 (uniform distribution), how many jackets should Champion make?
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