A box of Halloween themed chocolates costs $5 to make and distribute and sells f

Question

A box of Halloween themed chocolates costs $5 to make and distribute and sells for $10. Any boxes not sold by Halloween will be discounted to $1. Suppose that demand has been forecast to have a mean of 11,500 units with a standard deviation of 380 units and that the normal distribution is a reasonable representation of demand 8) (30 Points) a) What is the cost of not being able to fulfill one unit of demand when requested? b) What is the cost of each unit of excess inventories? Determine the purchase quantity of boxes of Halloween chocolate that balances the cost of lost sales and the cost of excess material. Round all your values to 2 decimals. Circle your answer c)

Explanation / Answer

a) Marginal cost of understocking (Ku) = 10 -5 = 5

b) Marginal cost of overstocking (Ko)= 5 -1 = 4

c) Therefore F(x) = Ku / (Ku + Ko) = 5/(5 +4) = 5/9

Optimum stock = (380)*(5/9) + ((11500 -380))

= 11331.11111

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.