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1. For each parka Obermeyer faces the situation of possibly producing too much or too little compared to actual demand.
Obermeyer has to place its first production order in November (about 9 to 10 months before the end-customer start buying the collection). Assume that Obermeyer could not place another order at a later point in time and disregard any minimum order quantities.
a. How many parkas of each style should Obermeyer order were available? Use the newsboy/newsvendor model (both terms are used for the same model) for your calculation.
b. How would the order quantity change if the loss for each unsold parka would not be 8%, but 46% in the above scenario?
2. Which assumptions of the newsboy model correspond to the real situation described in the case; which do deviate strongly?
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