What is the unit underage cost and critical ratio

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Anthropologie sells swimsuits for the summer season. The company purchases swimsuits from a low cost provider in Asia, but is only able to make a single purchase per year. The selling price for the swimsuits is p = $90.00/unit. Anthropologie pays c = $17.50/unit. Anthropologie can sell excess inventory making a flash sale at a salvage value of v = $11.75/unit. The management believes that the loss-of-goodwill cost is $10/unit. For these swimsuits, little or no historical information about demand is available. Based on her past experience, the purchasing manager believes that the demand distribution can assumed to be uniformly distributed between 3,000 units and 9,000 units. What is the unit overage cost? What is the unit underage cost? What is the critical ratio? What is the optimal order quantity?

Reference no: EM131030996

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