Sales forecaster prediction to describe normal probability

Assignment Help Operation Management
Reference no: EM131147978

As with other products, Specialty faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and for help with making an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similar products, Specialty’s senior sales forecaster predicted an expected demand of 20,000 units with a 0.90 probability that demand would be between 10,000 units and Prepare a managerial report that addresses the following issues and recommends an order quantity for the Weather Teddy product. 1. Use the sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales 10,000 units, most likely case in which sales 20,000 units, and best case in which sales 30,000 units. 4. One of Specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation.

Reference no: EM131147978

List and discuss the major risk management functions

A firm stores data for other organizations. The company stores data across many states, providing backup data storage for state, municipal governments, and large corporations.

Determine the optimum cost

The cost of carrying inventory is estimated at 15 % per year of the purchase cost. Find the lot-size that will minimize the cost of the system. Also determine the optimum co

Identify a potential ethical issue with this method

Defend your position with examples and support from the scholarly literature. Next, select a method of data collection and briefly explain its strengths and limitations. The

What is stress and what are stressors

What is stress? What are stressors? Can stress be good? Describe the difference between a Type A and Type B personality? Which are you? Which would you prefer to manage? Why?

What is the factorys efficiency

If tasks are divided in to 6 different workstations. The workstation cycle time per tire is 42 seconds. The time it takes for all tasks to be completed in producing a tire i

Maintain moderate amount of substantive conflict

Overall conflict management should aim to minimize affective conflicts at all levels, attain and maintain a moderate amount of substantive conflict, and use the appropriate co

What is swimkid margin of safety

Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $70,900. Swimkids exp

What are some key challenges in terms of achieving

Articulate key aspects of operations management. Explain why operations management is important to managers in various organizational areas. Please provide specific examples

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd