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1. What is Talisman's optimal inventory control policy; that is, its optimal order quantity Q* and re-order point R*? 2. How long does the average rulebook spend in Talisman before it is sold to a customer?

1. What is Talisman's optimal inventory control policy; that is, its optimal order quantity Q* and re-order point R*? 2. How long does the average rulebook spend in Talisman before it is sold to a customer?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Talisman Games, a local gaming store, stocks the 4th edition of the rulebook of a popular pen- and-paper role-playing game – Daggers and Dungeons. Talisman orders the rulebooks directly from its publisher – Wizards of the Shore (WotS). Talisman orders a rulebook at a wholesale price of $15 and sells it for $20. The lead-time from the supplier is 2 weeks and there is a fixed order cost of $10. Demand for the rulebook each week is independent of demand in previous weeks and is approximately normal with a mean of 4 per week with standard deviation of 3 per week. The owners of the store estimate that their opportunity cost of capital is around 15% per year. If a customer comes looking to buy a rule book but finds Talisman is stocked out, their copy is backordered and picked up when the next shipment arrives at Talisman from WotS. The customers are always eager to pick up their book, so no sales are lost. To reward loyalty, Talisman throws in a free set of dice (worth $2) with every backordered book purchase. 1. What is Talisman's optimal inventory control policy; that is, its optimal order quantity Q* and re-order point R*? 2. How long does the average rulebook spend in Talisman before it is sold to a customer? This morning a sales rep from WotS contacted the owners of Talisman. The owners learn that the new 5th edition of Daggers and Dungeons will be released in exactly 12 weeks. The sales rep told them that today was their last chance to order 4th edition books before they go out of print. Talisman forecasts that demand for the 4th edition will stay at the same level as before at its original price up until the 5th edition is released, but afterwards they will need to discount the 4th edition book by 30% in order to sell the remaining units (assume all are eventually sold at this reduced price). 3. What inventory level for 4th edition books should Talisman target to have in stock when the last order arrives two weeks from now?
Transcribed Image Text:Talisman Games, a local gaming store, stocks the 4th edition of the rulebook of a popular pen- and-paper role-playing game – Daggers and Dungeons. Talisman orders the rulebooks directly from its publisher – Wizards of the Shore (WotS). Talisman orders a rulebook at a wholesale price of $15 and sells it for $20. The lead-time from the supplier is 2 weeks and there is a fixed order cost of $10. Demand for the rulebook each week is independent of demand in previous weeks and is approximately normal with a mean of 4 per week with standard deviation of 3 per week. The owners of the store estimate that their opportunity cost of capital is around 15% per year. If a customer comes looking to buy a rule book but finds Talisman is stocked out, their copy is backordered and picked up when the next shipment arrives at Talisman from WotS. The customers are always eager to pick up their book, so no sales are lost. To reward loyalty, Talisman throws in a free set of dice (worth $2) with every backordered book purchase. 1. What is Talisman's optimal inventory control policy; that is, its optimal order quantity Q* and re-order point R*? 2. How long does the average rulebook spend in Talisman before it is sold to a customer? This morning a sales rep from WotS contacted the owners of Talisman. The owners learn that the new 5th edition of Daggers and Dungeons will be released in exactly 12 weeks. The sales rep told them that today was their last chance to order 4th edition books before they go out of print. Talisman forecasts that demand for the 4th edition will stay at the same level as before at its original price up until the 5th edition is released, but afterwards they will need to discount the 4th edition book by 30% in order to sell the remaining units (assume all are eventually sold at this reduced price). 3. What inventory level for 4th edition books should Talisman target to have in stock when the last order arrives two weeks from now?
Expert Solution
Step 1

A Small Introduction to Inventory Management

 

  • Inventory management alludes to the method involved with requesting, putting away, utilizing, and selling an organization's inventory.
  • This incorporates the management of unrefined substances, parts, and completed items, as well as warehousing and handling of such things.
  • Inventory management is the whole course of overseeing inventories from unrefined components to completed items.
  • Inventory management attempts to effectively smooth out inventories to stay away from the two overabundances and deficiencies.

 

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