Elucidate how tailored sourcing affect production profits

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Reference no: EM1376589

Q. Robert, a manufacturer of snow blowers, sells four models. Base model, Peter, has demand which is normally distributed, with a mean of 10,000 also a standard deviation of 1,000. Three o r models have additional features, also each has demand which is normally distributed, with a mean of 1,000 also a standard deviation of 700. Presently all four models are manufactured on same line at a cost of $100 for Peter also $110 for each of other three models. Peter sells for $200, whereas each of o r three models sells for $220. Any unsold blowers are sold at end of season for $80. Robert is considering use of tailored sourcing by setting up two separate lines, one for Peter also one for other three. Given which no changeovers will be requisite d on Peter line, production cost of Peter is expected to decline to $90. Production cost of o r three products, elucidate however, will now increase to $120. Do you recommend tailored sourcing for Robert? Elucidate how will tailored sourcing affect production also profits? Ignore holding costs for snow blowers.

Reference no: EM1376589

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