Peer Activity 1 -

Topic: Determining the optimal level of product availability 

Using the examples I have in the excel spread sheet complete the problem:

Champion manufactures winter fleece jackets for sale in the United States. Demand for jackets during the season is normally distributed, with a mean of 20,000 and a standard deviation of 10,000. Each jacket sells for $60 and costs $30 to produce. Any leftover jackets at the end of the season are sold for $25 at the year-end clearance sale. Holding jackets until the year-end sale adds another $5 to their cost. A recent recruit has suggested shipping leftover jackets to South America for sale in the winter there rather than running a clearance. Each jacket will fetch a price of $35 in South America, and all jackets sent there are likely to sell. Shipping costs add $5 to the cost of any jacket sold in South America. Would you recommend the South American option? How will this decision affect production decisions at Champion? How will it affect profitability? On average, how many jackets will Champion ship to South America each season?

Peer activity 2 -

Problem EX 1

A publisher sells books to Barnes & Noble at $12 each. The marginal production cost for the publisher is $1 per book. Barnes & Noble prices the book to its customers at $24 and expects demand over the next two months to be normally distributed, with a mean of 20,000 and a standard deviation of 5,000. Barnes & Noble places a single order with the publisher for delivery at the beginning of the two-month period. Currently, Barnes & Noble discounts any unsold books at the end of two months down to $3, and any books that did not sell at full price sell at this price.

a. How many books should Barnes & Noble order? What is its expected profit? How many books does it expect to sell at a discount?

b. What is the profit that the publisher makes given Barnes & Noble's actions?

c. A plan under discussion is for the publisher to refund Barnes & Noble $5 per book that does not sell during the two-month period. As before, Barnes & Noble will discount them to $3 and sell any that remain. Under this plan, how many books will Barnes & Noble order? What is the expected profit for Barnes & Noble? How many books are expected to be unsold? What is the expected profit for the publisher? What should the publisher do?

Attachment:- Assignment Files.zip