Reference no: EM133530032
BBQ King is making its stocking decision for the latest model of barbeque for the upcoming summer season. This barbeque sells for $2500 and BBQ King can purchase each unit for $1800. Any unsold barbeques at the end of the season will be sold at the discount price of $1250. BBQ King estimates that the demand for this new barbeque will be normally distributed with mean 200 and standard deviation 25.
(C1). Using the newsvendor model, calculate BBQ King's critical fractile. Show the answer with two decimal places.
(C2). Based on Question (C1), how many barbeques should BBQ King order?
(C3). List all assumptions you got directly from the question description in order to complete Questions (C1) and (C2).
(C4). List and justify all additional assumptions you needed to make. From this list, choose two assumptions that you don't like the most, and explain how relaxing them would change the decision for BBQ King.
(C5). The supplier who sells the barbeque to BBQ King sources the barbeque at a cost of $1300. Now suppose this supplier directly sells to end consumers at the same retailing price of $2500. Again, any unsold barbeques at the end of the season will be sold at the discount price of $1250. Without doing any calculation, do you think the supplier should order more or less than BBQ King (i.e., the answer for Question (C2))? Why?
(C6). Now perform the newsvendor model calculation based on information given in Question (C5). How many barbeques should the supplier order?