Geoff Gullo owns a small firm that manufactures "Gullo Sunglasses." He has the opportunity to sell a particular seasonal model to Land's End. Geoff is considering two purchasing options to offer to Land's End:

Option 1. Geoff sets his price at $65 and agrees to credit Land's End $53 for each unit Land's End returns to Geoff at the end of the season (because those units did not sell). Since styles change each year, there is essentially no value for Geoff in the returned merchandise.

Option 2. Geoff offers a price of $55 for each unit, but returns are no longer accepted. In this case, Land's End throws out unsold units at the end of the season.

This season's demand for this model will be normally distributed with mean of 200 and standard deviation of 125. Land's End will sell those sunglasses for $100 each. Geoff 's production cost is $25.

Quick response

Now, Geoff is considering to offer Land's End to provide them with a quick response during the selling season, but charging 25% premium on those orders. Therefore, under each option, Land's End can put a second order after the first month of the season, and receive that order in two weeks and sell them during the rest of season.

Make same simplifying assumptions as (prefect demand information at the time of the second order and no stockout before receiving the second order). Determine which option is better for Land's End and which option is better for Geoff if the quick response is offered.