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Quality Bike Products ( QBP ) is a national distributor of bicycle products ( bikes , service parts, and other accessories, some of which are

Quality Bike Products (QBP) is a national distributor of bicycle products (bikes, service parts, and other accessories, some of which are company-designed) for small, independent bike shops across the US. The final assembly suppliers for several of their company-designed line of bicycles are mainly located in Taiwan. These bicycle suppliers have an average lead-time of about 4 months between the time an order is placed by QBP and the associated shipment is received at QBPs distribution center in Bloomington, MN. Because of this long lead-time, QBP positions most of its annual bicycle inventory in its distribution center in anticipation of the main selling season, which runs from April to September. As a result, most orders to these bicycle suppliers are placed in early January for delivery in April.
One of QBPs bicycle models for the upcoming season is known as the Surley-007. This will be the first offering of this new model. The wholesale price for the Surley-007(i.e., the price QBP charges bike shops) will be $750 per bicycle. Based on an analysis of prior sales history for like-skus, seasonal demand at this price point for the Surley-007 is estimated to be normally distributed with a mean of 10,000 and a standard deviation of 3,500. In terms of expenses, QBP must pay the supplier $200 per bicycle ordered as well as an additional $10 per bicycle for shipping (including customs duties, etc.). QBP also incurs a seasonal holding cost, which is accounted as 10% of QBPs purchased cost. For the Surley-007, this results in a holding cost of $200 x 10%= $20 per bicycle. QBP also pays its sales staff a 15% commission, computed again as a % of QBPs purchased cost, for each bicycle sold to a bike shop.
How many Surley-007 bicycles should QBP order to maximize its expected profit? Explain your reasoning
What expected profit level does this order quantity imply for QBP?
What order quantity would you suggest if QBP wants to support a 90% in-stock probability target?

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