Einstein Games Inc. case Einstein Games, Inc. sells a variety of fun and educational family games. Management learned that the preholiday season is the best time to introduce a new game, because many families use this time to look for new ideas for December holiday gifts and activities. When Einstein discovers a new game with good market potential, it chooses an October market entry date In order to get games into its stores by October, Einstein places one-time orders with its manufacturers in June or July of each year. Demand for family games can be highly volatile. If a new game catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new games can also flop, leaving Einstein stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new game should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, Einstein plans to introduce a new product called GiggleBloxx. This is a stacking game made by a company in Texas. Children and parents alike will not be able to stop laughing. Consumer tests with the product show that families prefer GiggleBloxx to Jenga and SuspendO. Families often want to try out the new rave game during the holidays. As with other products, Einstein faces the decision of how many GiggleBloxx units to order for the coming holiday season. Members of the management team suggested order quantities of 25,000, 36,000, 48,000, or 65,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and help with making an order quantity recommendation. Einstein expects to sell GiggleBloxx for $14 based on a cost of $5 per unit. If inventory remains after the holiday season, Einstein will sell all surplus inventory for $3 per unit. After reviewing the sales history of similar products, Einstein's senior sales forecaster predicted an expected demand of 50,000 units with a .95 probability that demand would be between 30,000 units and 70,000 units. Managerial Report Prepare a managerial report that addresses the following issues and recommends an order quantity for the GiggleBloxx product. 1. Use the sales forecaster's prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales 30,000 units, most likely case in which sales = 50,000 units, and best case in which sales = 70,000 units. 4 One of Einstein's managers felt that the profit potential was so great that the order quantity should have a 75% chance of meeting demand and only a 25% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation Einstein Games Inc. case Einstein Games, Inc. sells a variety of fun and educational family games. Management learned that the preholiday season is the best time to introduce a new game, because many families use this time to look for new ideas for December holiday gifts and activities. When Einstein discovers a new game with good market potential, it chooses an October market entry date In order to get games into its stores by October, Einstein places one-time orders with its manufacturers in June or July of each year. Demand for family games can be highly volatile. If a new game catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new games can also flop, leaving Einstein stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new game should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, Einstein plans to introduce a new product called GiggleBloxx. This is a stacking game made by a company in Texas. Children and parents alike will not be able to stop laughing. Consumer tests with the product show that families prefer GiggleBloxx to Jenga and SuspendO. Families often want to try out the new rave game during the holidays. As with other products, Einstein faces the decision of how many GiggleBloxx units to order for the coming holiday season. Members of the management team suggested order quantities of 25,000, 36,000, 48,000, or 65,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and help with making an order quantity recommendation. Einstein expects to sell GiggleBloxx for $14 based on a cost of $5 per unit. If inventory remains after the holiday season, Einstein will sell all surplus inventory for $3 per unit. After reviewing the sales history of similar products, Einstein's senior sales forecaster predicted an expected demand of 50,000 units with a .95 probability that demand would be between 30,000 units and 70,000 units. Managerial Report Prepare a managerial report that addresses the following issues and recommends an order quantity for the GiggleBloxx product. 1. Use the sales forecaster's prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales 30,000 units, most likely case in which sales = 50,000 units, and best case in which sales = 70,000 units. 4 One of Einstein's managers felt that the profit potential was so great that the order quantity should have a 75% chance of meeting demand and only a 25% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation