What order quantity maximizes expected profit

Assignment Help Operation Management

Reference no: EM132163955

A music store is restocked weekly. The weekly demand for a best-selling CD is normal, with mean of 200 and standard deviation of 50. These CDs cost $8.00 per piece, and the store earns $4.50 per CD sold. Excess demand is lost (salvage value is $0); Customers go to a competitor's store rather than wait for resupply.

Suppose that exactly 10% of the start-of-week inventory of this CD disappears from the store without being sold; this is euphemistically known as a 10% shrinkage rate. Now, what order quantity maximizes expected profit?

Reference no: EM132163955

Questions Cloud

Carefully consider type of organizational structure : Why is it important for managers to carefully consider the type of organizational structure that they use to implement their strategies? Explain.

Describe the response of leaders to the situation : Conflict may occur in many different aspects of people's lives, and how individuals respond to conflict may differ depending on the situation.

The flow of information within a hospitality organization : One of the most effective strategies for increasing the flow of information within a hospitality organization is to give all employees access.

Decision to purchase software package from standard : How would you explain the board’s decision to purchase the software package from Standard?

What order quantity maximizes expected profit : Suppose that exactly 10% of the start-of-week inventory of this CD disappears from the store without being sold; what order quantity maximizes expected profit?

Analyze how this organization aligns its business strategy : Analyze how this organization aligns its business strategy with its supply chain strategy and recommend strategy or tactics.

How ethical case would or should play out in the environment : "Future scenario." Describe how this ethical case (or an analogous one) would or should play out in the environment of the future, and give your opinions about.

Difference between forecasting demand and forecasting sales : Is there a difference between forecasting demand and forecasting sales? Can demand be forecast from historical sales data?

Analyze how they may impact your selected organization : Analyze how they may impact your selected organization and what actions are necessary to get ready to address these trends.

User Account

All Pages