Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A retailer orders custom tchotchkes from a specialty manufacturer. It costs the manufacturer $1 to make a tchotchke. The manufacturer sells the tchotchke to the

A retailer orders custom tchotchkes from a specialty manufacturer. It costs the manufacturer $1 to make a tchotchke. The manufacturer sells the tchotchke to the retailer at $7. The retailer in turn will sell the tchotchke to customers at $20. If the tchotchke is not sold by the end of the season it is worthless and will have to be discarded. Assume that demand is normally distributed with a mean of 1000 and standard deviation of 200.

  1. How many tchotchkes should the retailer order? What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?
  2. Now consider a scenario where the manufacturer will buy-back any unsold tchotchkes from the retailer at the end of the season for $3. How many tchotchkes should the retailer order? What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?
  3. Now consider a scenario where the manufacturer will sell tchotchkes to the retailer at cost ($1) but will take 53% of the sales revenue. How many tchotchkes should the retailer order? What are the expected profits for the retailer and manufacturer? What is the total profit of the supply chain?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Workbook Step By Step Exercises And Tests To Help You Master Valuation

Authors: McKinsey & Company Inc.

7th Edition

1119611814, 978-1119611813

More Books

Students also viewed these Finance questions

Question

a. What is the firms cost of equity and WACC at this time?

Answered: 1 week ago

Question

6. Identify characteristics of whiteness.

Answered: 1 week ago

Question

9. Explain the relationship between identity and communication.

Answered: 1 week ago