Griffin Manufacturing Corporation (GMC) manufactures and sells upscale formal wear in the US market. One of its signature products is the 'Classic Griffin'an Oxford 24-point button-down dress shirt. It sells the shirts for $100 each. Every year, it redesigns its signature shirt, and shirts not sold that year are given away to various charities at no charge. Retail demand for the Classic Griffin in the coming year is estimated to be Normally distributed with a mean 1000 and standard deviation of 300. Griffin has two factoriesone in Costa Rica and another near Boston, Massachusetts. The two factories differ in their capabilities as discussed below.

Manufacturing in Costa Rica is cheap and costs $20 per shirt, inclusive of the cost of shipping the product to retail outlets by sea or land. But lead times are long, so GMC has to commit to a production quantity several months before the selling season.

Manufacturing in Boston is expensive and costs $40 per shirt. In addition, it costs GMS $10 per unit on average to air-ship the shirt to retail outlets. The advantage of producing in the Boston factory is that lead times are very short, so GMC can produce the shirts after receiving retailers' orders at the beginning of the season. Effectively, GMC can produce its signature shirt 'make-to-order' in the Boston factory.

1. Suppose GMC decided to produce the Classic Griffin only in its Costa Rica factory. It will use its Boston factory for other products. How many shirts should GMC make in its Costa Rica factory?

2. Suppose GMC decided to produce the Classic Griffin only in its Costa Rica factory, and it produces 1300 shirts. What are its expected profits from the Classic Griffin?

3. Now suppose GMC decides to produce the Classic Griffin only in its Boston factory, and air-ship its production to all its retail outlets. It will reassign its Costa Rica factory for other products. What will be GMC's expected profits from the Classic Griffin using this strategy?

4. GMC's new vice-president is Sarah, a sharp graduate who majored in Operations from the David Eccles School of Business at the University of Utah. Sarah argues with the Board, "We should leverage our divergent strengths from both factories to improve profits. Specifically, we should produce shirts in advance in our cheaper Costa Rica factory, and if we fall short during the selling season, we should replenish from the quicker Boston factory using air-shipments." Call this Sarah's Strategy. Under Sarah's Strategy, how many shirts should GMC produce in Costa Rica?

5. GMC decides to implement Sarah's Strategy, and produce exactly 1000 shirts (the mean demand) in its Costa Rica factory. It will produce extra shirts during the season (if demanded) at its higher-cost but quicker Boston factory. What are GMC's expected profits from this strategy?