Chapter 13 Exercise 12

Lake Grove Confectionaries (LGC) sells chocolates for the holiday season in specially designed boxes. The firm sells four designs, and currently, all packaging is done in the plant as chocolates are manufactured. All manufacturing and packaging for the holiday season are completed before the start of the season. The demand forecast for each of the four designs is normally distributed, 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 $1.

a. How many boxes of each design should LGC manufacture?

b. What is the expected profit from this policy?

c. How many boxes does LGC expect to sell at a discount?

d. An option being considered by LGC is to separate chocolate production from the 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 add $2 to the cost of production. How many boxes of chocolates should LGC manufacture if it decides to postpone packaging? What is the expected profit? 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?

Chapter 13 Exercise 12

Currently, how many boxes of the four designs should LGC manufacture?

Chapter 13 Exercise 12

Currently, how many boxes does LGC expect to sell at a discount for each design?

1. 627
2. 6538
3. 6721
4. 6965

Chapter 13 Exercise 12

What is the expected total profit of all four designs from current policy? (Round the final number to whole dollar.)

1. $168,362
2. $376,519
3. $673,446
4. $736,821

Chapter 13 Exercise 12

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? (Round to whole number.)

Chapter 13 Exercise 12

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. What is the optimal expected profit can LGC make if it decides to postpone packaging? (Round to whole number.)

1. $560,515
2. $581,382
3. $608,545
4. $627,191

Chapter 13 Exercise 12

Assuming that LGC has developed a new packaging method that reduced the packing cost from $2 to $0.5. What is the optimal expected profit can LGC make if it decides to postpone packaging? (Round to whole number.)

Chapter 13 Exercise 15

A publisher is printing calendars for the coming year. Demand for calendars is normally distributed, with a mean of 70,000 and a standard deviation of 25,000. The cost per calendar is $3, and they are sold for $10 each. All unsold calendars are recycled at the end of January.

1. How many calendars should the publisher have printed? What is the expected profit?

2. The printer has offered to discount the printing cost to $2.75 per calendar if the publisher orders at least 100,000. What should the publisher do?

Chapter 13 Exercise 15

Do not consider the quantity discount, what is the expected profit of the publisher?

1. 361579
2. 385262
3. 403077
4. 417,288

Chapter 13 exercise 15

The printer has offered to discount the printing cost to $2.75 per calendar if the publisher orders at least 100,000. If the publisher take this offer, what will be the expected profit?

1. 348752
2. 367822
3. 382165
4. 410974