value: 1.00 points Conceptual Question 13-7 A retailer has two... A retailer has
ID: 364263 • Letter: V
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value: 1.00 points Conceptual Question 13-7 A retailer has two... A retailer has two merchandizers, Sue and Bob, who are responsible for setting order quantities for the products they manage. For all of their products the critical ratio is 0.7 and the coefficient of variation of their demand forecasts are 0.35. At the end of the season, Sue is proud to report that she sold the entire inventory she purchased. Bob, on the other hand, sold out only about a third of his products. Who is more likely to be choosing quantities that maximize expected profit? OSue, because she doesn't incur the cost of salvaging inventory. Osue, because she must have sold more units than Bob. Bob, because even leftover inventory generates some additional revenue. OBob, because he is probably ordering more than the mean of the demand forecast.Explanation / Answer
option D, Bob, because he is probably ordering more than the mean of the demand forecast
the variation in demand is high at 0.35, which means there is 35% variability in demand. and the critical ratio is 0.7 which means there is some value in unsold items through salvage value. Hence, Bob is ordering the optimal quantity which is normally higher than the mean demand forecast and there is always some leftover.
Sue on the other hand could have ordered much less than the mean demand hence sold out everything.
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