Cost of Prediction Errors Reconsider the toy-rocket illustration in the section on “Cost of Prediction Errors.” Suppose the manager does not have the privilege of returning any unsold rockets. Instead, because of their souvenir markings, they are worthless. He acquired 1,000 units, but unforeseen competition reduced sales to 800 units.

What was the cost of the prediction error?

2. Suppose that demand was unusually heavy. He sold all 1,000 units, but he was sure that he could have sold a total of 1,200 units if he had not run out of stock. What was the cost of the prediction error? lop1