How many sets of clubs should the shop owner order

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Reference no: EM133345356

Case: The owner of a local golf shop must decide how many sets of beginner golf clubs to order each month for the coming season (May through October). Historical demand (10 years) and selling price per set for each month is the following:

Demand
May June July August September October
59 89 69 49 29 39
65 96 75 54 33 44
49 76 58 40 29 38
60 90 70 50 32 42
52 86 61 43 24 36
63 110 74 53 32 53
51 86 63 42 27 37
55 82 66 45 25 34
53 85 65 44 27 37
56 85 61 46 27 36
Selling Price $145.00 $140.00 $130.00 $110.00 $80.00 $60.00

In May, each set of clubs can be ordered at a cost of $75 which is expected to drop by 5% a month during the remainder of the season. In addition, the owner of the shop also gives away a free set of clubs to anyone who makes a hole-in-one from a short practice tee next to the shop. The number of people making a hole-in-one on this tee each month follows a Poisson distribution with a mean of 3. Any sets of clubs left over at the end of October are sold for $45 per set. Use @RISK for this answer.

Question 1: How many sets of clubs should the shop owner order if he wants to maximize the expected profit?

Question 2: What are the best-case and worst-case outcomes the owner may face on this product if he implements your suggestion?

Question 3: How likely is that the store owner will make between $12,500 and $14,300 if he implements your suggestions?

Question 4: What percentage of the total demand for this product will the owner be able to meet if he implements your suggestion?

Reference no: EM133345356

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