Question
(Please use at least four significant figures in your calculations) Obscure&Obfuscated sells fashionable jeans through the fashion boutique Roman+John. They have an estimate of the
(Please use at least four significant figures in your calculations)
Obscure&Obfuscated sells fashionable jeans through the fashion boutique Roman+John. They have an estimate of the sales of their new model of jeans; demand for the jeans for this season is expected to be normally distributed with a mean of 1277 sales and a standard deviation of 457.
Each pair of jeans cost Obscure&Obfuscated Jeans $50 to make. Roman+John buys the jeans wholesale from Obscure&Obfuscated for $80, then turns around and sells them for $160. Whatever jeans do not get sold, either by the supplier or the manufacturer, are placed on clearance for $40 each.
To reduce the costs of managing their inventory, Roman+John goes to a consignment system, where Obscure&Obfuscated Jeans makes all inventory decisions, and is responsible for all decisions. Obscure&Obfuscated Jeans will determine how many jeans to order and stock in Roman+Johns stores. All prices, including those between Obscure&Obfuscated and Roman+John, remain the same; any stock that is not sold is bought back at wholesale price by Obscure&Obfuscated, who then place the jeans on clearance for $40, which Obscure&Obfuscated receives. Given that Obscure&Obfuscated Jeans will make the decision as to how many jeans are manufactured and ordered under this system and receive the , how many jeans should Obscure&Obfuscated Jeans make and stock in Roman+John stores in order to maximize Obscure&Obfuscated Jeans profits? _________________________________
(Just a quick note: All of the complex verbiage in the last paragraph? Is basically all to ask, "Given the wholesale, retail, and clearance price that Obscure&Obfuscated sees, what's the optimal order amount from Obscure&Obfuscated's perspective?")
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