Teddy Bower is an outdoor clothing and accessories chain that purchases a line of parkasat $10 each from its Asian supplier, TeddySports. Unfortunately, at the time of the orderplacement, demand is still uncertain: Teddy Bower forecasts that its demand is normallydistributed with a mean of 2100 and a standard deviation of 1200. Teddy Bower sellsthese parkas at $22 each. Unsold parkas have little salvage value; Teddy Bower simplygives them away to a charity (and also doesn’t collect a tax benefit for the donation).a. What is the probability this parka turns out to be a “dog,” defined as a product thatsells less than half of the forecast? b. How many parkas should Teddy Bower buy from TeddySports to maximize expectedprofit? c. If Teddy Bower orders 3000 parkas, what is the in-stock probability? d. If Teddy Bower orders 3000 parkas, what is the expected leftover inventory? e. If Teddy Bower orders 3000 parkas, what are expected sales? f. If Teddy Bower orders 3000 parkas, what is expected profit? g. If Teddy Bower wishes to ensure a 98.5 percent in-stock probability, how many parkasshould Teddy Bower order?
Teddy Bower is an outdoor clothing and accessories chain that purchases a line of parkas
at $10 each from its Asian supplier, TeddySports. Unfortunately, at the time of the order
placement, demand is still uncertain: Teddy Bower forecasts that its demand is normally
distributed with a mean of 2100 and a standard deviation of 1200. Teddy Bower sells
these parkas at $22 each. Unsold parkas have little salvage value; Teddy Bower simply
gives them away to a charity (and also doesn’t collect a tax benefit for the donation).
a. What is the probability this parka turns out to be a “dog,” defined as a product that
sells less than half of the forecast?
b. How many parkas should Teddy Bower buy from TeddySports to maximize expected
profit?
c. If Teddy Bower orders 3000 parkas, what is the in-stock probability?
d. If Teddy Bower orders 3000 parkas, what is the expected leftover inventory?
e. If Teddy Bower orders 3000 parkas, what are expected sales?
f. If Teddy Bower orders 3000 parkas, what is expected profit?
g. If Teddy Bower wishes to ensure a 98.5 percent in-stock probability, how many parkas
should Teddy Bower order?
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