A buyer for a large department store chain must place orders with an athletic shoe manufacturer six months prior to the time the shoes will be sold in the department stores. The buyer must decide on November 1 how many pairs of the manufacturer's newest model of tennis shoes to order for sale during the coming summer season. Assume that each pair of this new brand of tennis shoes costs the department store chain $65 per pair. Furthermore, assume that each pair of these shoes can then be sold to the chain's customers for $85 per pair. Any pairs of these shoes remaining unsold at the end of the summer season will be sold in a closeout sale next fall for $55 each. The probability distribution of consumer demand for these tennis shoes during the coming summer season has been assessed by market research specialists and is provided in the file P09_35.xlsx. Finally, assume that the department store chain must purchase these tennis shoes from the manufacturer in lots of 100 pairs.a. Identify the strategy that maximizes the department store chain's expected profit earned by purchasing and subsequently selling pairs of the new tennis shoes. Is a decision tree really necessary? If so, what does it add to the analysis? If not, why not? A buyer for a large department store chain must place orders with an athletic shoe manufacturersix months prior to the time the shoes will be sold in the department stores. The buyer mustdecide on November 1 how many pairs of the manufacturer's newest model of tennis shoes toorder for sale during the coming summer season. Assume that each pair of this new brand oftennis shoes cents the department store chain $45 per pair. Furthermore, assume that each pairof these shoes can then be sold to the chain's customers for $70 per pair. Any pairs of theseshoes remaining unsold at the end of the summer season will be sold in a closeout sale next fallfor $35 each. The probability distribution of consumer demand for these tennis shoes during thecoming summer season has been assessed by market research specialists and is provided inthe file P09_35.xlsx. Finally, assume that the department store chain must purchase these tennisshoes from the manufacturer in lots of 100 pairs.a. Identify the strategy that maximizes the department store chain's expected profit earned bypurchasing and subsequently selling pairs of the new tennis shoes. Is a decision tree reallynecessary? If so, what does it add to the analysis? If not, why not?

πij= Revenue from regular price +Revenue from closeoutprice-cost of purchase =…

Answered: strategy that maximizes the department…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 62P: An automobile manufacturer is considering whether to introduce a new model called the Racer. The...

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A buyer for a large department store chain must place orders with an athletic shoe manufacturer six months prior to the time the shoes will be sold in the department stores. The buyer must decide on November 1 how many pairs of the manufacturer's newest model of tennis shoes to order for sale during the coming summer season. Assume that each pair of this new brand of tennis shoes costs the department store chain $65 per pair. Furthermore, assume that each pair of these shoes can then be sold to the chain's customers for $85 per pair. Any pairs of these shoes remaining unsold at the end of the summer season will be sold in a closeout sale next fall for $55 each. The probability distribution of consumer demand for these tennis shoes during the coming summer season has been assessed by market research specialists and is provided in the file P09_35.xlsx. Finally, assume that the department store chain must purchase these tennis shoes from the manufacturer in lots of 100 pairs.

a. Identify the strategy that maximizes the department store chain's expected profit earned by purchasing and subsequently selling pairs of the new tennis shoes. Is a decision tree really necessary? If so, what does it add to the analysis? If not, why not?

Transcribed Image Text:A buyer for a large department store chain must place orders with an athletic shoe manufacturer six months prior to the time the shoes will be sold in the department stores. The buyer must decide on November 1 how many pairs of the manufacturer's newest model of tennis shoes to order for sale during the coming summer season. Assume that each pair of this new brand of tennis shoes cents the department store chain $45 per pair. Furthermore, assume that each pair of these shoes can then be sold to the chain's customers for $70 per pair. Any pairs of these shoes remaining unsold at the end of the summer season will be sold in a closeout sale next fall for $35 each. The probability distribution of consumer demand for these tennis shoes during the coming summer season has been assessed by market research specialists and is provided in the file P09_35.xlsx. Finally, assume that the department store chain must purchase these tennis shoes from the manufacturer in lots of 100 pairs. a. Identify the strategy that maximizes the department store chain's expected profit earned by purchasing and subsequently selling pairs of the new tennis shoes. Is a decision tree really necessary? If so, what does it add to the analysis? If not, why not?

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