Lemington’s is trying to determine how many Jean Hudson dresses to order for the spring season. Demand for the dresses is assumed to follow a normal distribution with mean 400 and standard deviation 100. The contract between Jean Hudson and Lemington’s works as follows. At the beginning of the season, Lemington’s reserves x units of capacity. Lemington’s must take delivery for at least 0.8 x dresses and can, if desired, take delivery on up to x dresses. Each dress sells for $160 and Hudson charges $50 per dress. If Lemington’s does not take delivery on all x dresses, it owes Hudson a $5 penalty for each unit of reserved capacity that is unused. For example, if Lemington’s orders 450 dresses and demand is for 400 dresses, Lemington’s will receive 400 dresses and owe Jean 400($50) + 50($5). How many units of capacity should Lemington’s reserve to maximize its expected profit?

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Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659
BuyFind

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

Solutions

Chapter
Section
Chapter 10, Problem 35P
Textbook Problem

Lemington’s is trying to determine how many Jean Hudson dresses to order for the spring season. Demand for the dresses is assumed to follow a normal distribution with mean 400 and standard deviation 100. The contract between Jean Hudson and Lemington’s works as follows. At the beginning of the season, Lemington’s reserves x units of capacity. Lemington’s must take delivery for at least 0.8x dresses and can, if desired, take delivery on up to x dresses. Each dress sells for $160 and Hudson charges $50 per dress. If Lemington’s does not take delivery on all x dresses, it owes Hudson a $5 penalty for each unit of reserved capacity that is unused. For example, if Lemington’s orders 450 dresses and demand is for 400 dresses, Lemington’s will receive 400 dresses and owe Jean 400($50) + 50($5). How many units of capacity should Lemington’s reserve to maximize its expected profit?

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Chapter 10 Solutions

Practical Management Science
Ch. 10.4 - In the Walton Bookstore example, suppose that...Ch. 10.4 - A sweatshirt supplier is trying to decide how many...Ch. 10.4 - In the Walton Bookstore example with a discrete...Ch. 10.5 - If you add several normally distributed random...Ch. 10.5 - In Problem 11 from the previous section, we stated...Ch. 10.5 - Continuing the previous problem, assume, as in...Ch. 10.5 - In Problem 12 of the previous section, suppose...Ch. 10.5 - Use @RISK to analyze the sweatshirt situation in...Ch. 10.5 - Although the normal distribution is a reasonable...Ch. 10.6 - When you use @RISKs correlation feature to...Ch. 10.6 - When you use @RISKs correlation feature to...Ch. 10.6 - Repeat Problem 23, but now make the second input...Ch. 10.6 - The Business School at State University currently...Ch. 10 - Six months before its annual convention, the...Ch. 10 - You have made it to the final round of the show...Ch. 10 - A new edition of a very popular textbook will be...Ch. 10 - A hardware company sells a lot of low-cost,...Ch. 10 - W. L. Brown, a direct marketer of womens clothing,...Ch. 10 - Assume that all of a companys job applicants must...Ch. 10 - Lemingtons is trying to determine how many Jean...Ch. 10 - Dilberts Department Store is trying to determine...Ch. 10 - It is surprising (but true) that if 23 people are...Ch. 10 - A Flexible Savings Account (FSA) plan allows you...Ch. 10 - At the beginning of each week, a machine is in one...Ch. 10 - Simulation can be used to illustrate a number of...Ch. 10 - In statistics we often use observed data to test a...Ch. 10 - You are making several runs of a simulation model,...Ch. 10 - If you want to replicate the results of a...Ch. 10 - Suppose you simulate a gambling situation where...Ch. 10 - You plan to simulate a portfolio of investments...Ch. 10 - Big Hit Video must determine how many copies of a...Ch. 10 - Many people who are involved in a small auto...Ch. 10 - A building contains 1000 lightbulbs. Each bulb...Ch. 10 - Why is the RISKCORRMAT function necessary? How...Ch. 10 - Consider the claim that normally distributed...Ch. 10 - It is very possible that when you use a...Ch. 10 - When you use a RISKSIMTABLE function for a...Ch. 10 - Consider a situation where there is a cost that is...

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