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The buyer for a department store must decide on the quantity of a designer women's handbag to procure in Italy for the upcoming fall fashion season. The unit cost of the handbag to the store is $30.00 and the handbag will sell for $150.00. Any handbags not sold by the end of the season are purchased by a discount firm for $15.00. Based on historical data of similar handbags, the buyer believes that the demand for the handbag can be modeled by a normal distribution with mean =150 and standard deviation = 25.

What is the shortage cost per unit (C_s)?

What is the excess cost per unit (C_e)?

What is the optimal number of handbags to purchase?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92185046

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