question archive CanadaLoon is deciding how many units to order of their new parka (The Snowmaggedon II) for 2020 to be sold through Canadian specialty stores
CanadaLoon is deciding how many units to order of their new parka (The Snowmaggedon II) for 2020 to be sold through Canadian specialty stores
Subject:Operations ManagementPrice: Bought3
CanadaLoon is deciding how many units to order of their new parka (The Snowmaggedon II) for 2020 to be sold through Canadian specialty stores. They expect to sell to the retailers 3000 units with a standard deviation of 900 units and have assumed a normal distribution for the demand. The selling price to the retailers is $450. The production cost is $280. Units that are not purchased in Canada will be sold in South America during July where retailers will only pay $250 per unit.
a) CanadaLoon quotes an in-stock probability of 90% when placing their optimal order. At how much do they value the cost per unit of unsatisfied demand? Is this equal to the margin made on each parka? Why?
