What simpler normal distribution model

Assignment Help Operation Management

Reference no: EM132142519

Neighborhood Hardware Ltd. acts as a central buying agent and distributor for a large number of retail hardware outlets in Canada. The product line is divided into six major categories, with a different buyer being responsible for every single category. One category is miscellaneous equipment for outdoor work around the home. The buyer for this group, Mr. Harry Lock, seeks assistance from you. In particular, Mr. Lock is concerned with the acquisition of a particular type of small snowblower that must be ordered several months before the winter. Mr. Lock has determined the snowblowers acquisition cost is $85.00 per unit and the selling price is $150.00 per unit. Any snowblowers unsold at the end of winter will be marked down to $51 per unit, ensuring a complete clearance and thus avoiding the prohibitive expense of storage until next season. The probability distribution of regular demand is estimated to be:

Number of Units: 300 400 500 600 700 800

Probability: 0.25 0.15 0.2 0.2 0.1 0.1

a. What is the expected demand?

b. What is the standard deviation of demand?

c. To maximize expected profit, how many units should you (using a discrete demand model) suggest to Mr. Lock to acquire?

d. What is the expected profit from your part c) strategy?

e. Suppose you decided instead to model demand using a normal distribution. The normal distribution will have the same mean and standard deviation as the above discrete distribution. With the normal model, what is the recommended order quantity, rounded to the nearest hundred units?

f. If the discrete distribution is the true one, what cost penalty is incurred by the use of the somewhat simpler normal distribution model?

Reference no: EM132142519

Questions Cloud

Consumers can force the limited-information market : Explain the intuition behind the result that enough informed consumers can force the limited-information market outcome to the competitive result

The information technology outsourcing business : Can Brazil become a global competitor in the information technology outsourcing business?

Discuss the process and the significance of labor relations : Discuss the process and the significance of labor relations. In what way are unions a positive or a negative factor for healthcare organizations?

What do you learn in private-public partnership : What do you learn in private-public partnership? What is the purpose of clinical decision support systems?

What simpler normal distribution model : If the discrete distribution is the true one, what cost penalty is incurred by the use of the some what simpler normal distribution model?

How many triple-w sprayer should billy bob order : Billy Bob owns several hardware stores. How many Triple-W Sprayer should Billy Bob order?

Find the optimal batch size : Suppose the weekly demand for a soft drink syrup is exponentially distributed with mean 150 gallons. Find the optimal batch size.

What was positive or negative about the experience : What experiences have you had as a customer in the twenty-first century. What was positive or negative about the experience?

Montgomery burns and several corporations : Ned Flanders, an accountant licensed by the state of California, provided accounting services to Montgomery Burns and several corporations

User Account

All Pages