Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lemington's is trying to determine how many Jean Hudson dresses to order for the spring season. Demand for the dresses is assumed to follow a

image text in transcribed Lemington's is trying to determine how many Jean Hudson dresses to order for the spring season. Demand for the dresses is assumed to follow a normal distribution with mean 480 and standard deviation 120. The contract between Jean Hudson and Lemington's works as follows. At the beginning of the season, Lemington's reserves x units of capacity. Lemington's must take delivery for at least 0.8x dresses and can, if desired, take delivery on up to x dresses. Each dress sells for $160 and Hudson charges $50 per dress. If Lemington's does not take delivery on all x dresses, it owes Hudson a $5 penalty for each unit of reserved capacity that is unused. For example, if Lemington's orders 450 dresses and demand is for 400 dresses, Lemington's will receive 400 dresses and owe Jean 400($50)+50($5). How many units of capacity should Lemington's reserve to maximize its expected profit? Try units of capacity from 400 to 900 , with increments of 50 units. Round your answer to the nearest whole number, if necessary. Optimal units of capacity

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

Small Business Management Entrepreneurship and Beyond

Authors: Timothy s. Hatten

5th edition

538453141, 978-0538453141

More Books

Students also viewed these General Management questions

Question

What are the various stages of a criminal trial? Describe each one.

Answered: 1 week ago

Question

What was the first US state admitted to the union?

Answered: 1 week ago

Question

What was the last currency to be used in the US before the dollar?

Answered: 1 week ago

Question

In what state was George Washington born?

Answered: 1 week ago

Question

What year did the American civil war begin?

Answered: 1 week ago