A retailer has two merchandizers, Sue and Bob, who are responsible for setting order quantities for the

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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 .7 and the coefficient of variation of their demand forecasts is 0.35. At the end of the season, Sue is proud to report that she has sold the entire inventory she purchased. Bob, on the other hand, sold only about a third of his products. Who is more likely to be choosing quantities that maximize expected profit? 

a. Sue because she doesn’t incur the cost of salvaging inventory. 

b. Sue because she must have sold more units than Bob. 

c. Bob because even leftover inventory generates some additional revenue. 

d. Bob because he is probably ordering more than the mean of the demand forecast.

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Operations Management

ISBN: 9781260547610

2nd International Edition

Authors: Gerard Cachon, Christian Terwiesch

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