8. 9. 10. A major fastfood company is running a promotion for chil dren's meals for which it offers a Sharky toy. A single order will be placed for the toys. Each toy costs $0.50, and any unsold toys will have to be scrapped at the end of the promotion. The margin from each meal (including the toy) is $1.00, and chil dren are likely to go to a competitor if the fastfood company is out of toys. The demand for meals with the toys is forecast to be normally distributed, with a mean of 50,000 and a standard deviation of l5,000. a. How many Sharky toys should be ordered in advance of the promotion? b. An issue has been raised that customers who go to competitors may be lost for the long term. It has been estimated that the cost of not having toys in stock is $5 per stockout because of the loss of current and future sales. How does this information affect the number of Sharky toys to be ordered? The Highland Company (THC) is planning orders for its winter catalog. One order is to be placed at the beginning of the sea son. The demand forecast for one of its jackets is normal, with a mean of 5,000 and standard deviation of 2,000. Each jacket is purchased for $l00, and any unsold jackets at the end of the season will be discounted and sold through the outlet store for $75. At this price, virtually all jackets are expected to sell. It costs another $15 to store an unsold jacket for the season and then move it to the outlet store. The members of the buying committee disagree on the effect of stocking out and the num ber of jackets to be ordered. One of the members believes that 6,000 jackets should be ordered, whereas another wants to order 8,000 jackets. a. At what cost of stocking out would each member's order size be justied? b. If the planned sale price is $200, describe a situation in which ordering 6,000 jackets makes sense. Describe another situation in which ordering 8,000 jackets makes sense. Sport Obermeyer (SO) is a manufacturer of ski apparel. A ski jacket is sourced at a cost of $80 and sold for $125. One order is placed at the beginning of the season. Currently, SO disposes of any unsold jackets at the end of the season to outlet stores at $70. It costs $l0 to hold a jacket in inventory for the entire season and then ship it to an outlet store. Demand for ski jackets has been forecast to be normally distributed, with a mean of 4,000 and a standard deviation of 1,750. a. How many jackets should SO order for the season assum ing a single order? b. What is the expected prot from this policy? c. What is the expected overstock at the end of the season that will be sent to outlet stores? SO is considering an alternative under which it will ship surplus jackets at the end of the season for sale in the Southern Hemisphere. Inclusive of all costs, SO expects the salvage value to increase to $75 under this option. How will this change affect the quantity ordered, expected ll. [2. l3. prots, and expected overstock to be sent to the Southern Hemisphere? Do you recommend this option? Daily demand for aspirin at DoorRed Pharmacy is normally distributed, with a mean of 40 bottles and a standard deviation of 5. The replenishment lead time from the supplier is one day. The current inventory policy at DoorRed is to order 200 bottles when the quantity on hand drops below 45. Each bottle costs DoorRed $4, and the pharmacy uses a holding cost of 25 percent. a. If all unfilled demand is assumed to be backlogged and carried over to the next cycle, what cost of understocking justies the current policy? b. If all unlled demand is assumed to be lost, what cost of stocking out justies the current policy? c. DoorRed believes that all unlled demand can be back logged if customers are given a $l.50 discount on their next purchase (effectively making the cost of under stocking $1.50). What inventory policy do you recom mend for DoorRed? Lake Grove Confectionaries (LGC) sells chocolates for the holiday season in specially designed boxes. The rm sells four designs, and currently all packaging is done in the plant as chocolates are manufactured. All manufacturing and pack aging for the holiday season are completed before the start of the season. The demand forecast for each of the four designs is normal, with a mean of 20,000 and a standard deviation of 8,000. Each box costs $10 and is sold for $20. Any unsold boxes at the end of the season are discounted to $8, and they all sell out at this price. The cost of holding a box in inventory for the entire season before selling it at a discount is $l . How many boxes of each design should LGC manufacture? What is the expected prot from this policy? How many boxes does LGC expect to sell at a discount? An option being considered by LGC is to separate chocolate production from packaging. Chocolates will be produced before the start of the season, but packaging will be done on an express line as orders come in. The express line and separation of steps adds $2 to the cost of production. How many boxes of chocolates should LGC manufacture if it decides to postpone packaging? What is the expected prot? How many boxes will LGC sell at a discount if it uses postponement? e. At what additional cost of postponement (instead of the current $2) would LGC be indifferent between operating with and without postponement? in"??? The Knitting Company (TKC) is planning production for its four sweater styles that are popular during Christmas. All four styles have demand that is normally distributed. The bestselling style has an expected demand of 30,000 and a standard deviation of 5,000. Each of the other three styles has an expected demand of l0,000 with a standard deviation of 4,000. Currently all sweaters are produced before the start of the season. Production cost is $20 per sweater, and they are sold for a wholesale price of $35. Any unsold sweaters at the end of the season are discounted to $l5, and they all sell