Question
The Highland Company (THC) is planning orders for its summer catalog. One order is placed now for April delivery. The demand forecast for one of
The Highland Company (THC) is planning orders for its summer catalog. One order is placed now for April delivery. The demand forecast for one of its jackets is normal, with a mean of 5,000 and a standard deviation of 2,000. Each jacket is purchased for $100, and any unsold jackets at the end of the season will be discounted and sold through the outlet store for $75. At this price, virtually all jackets are expected to sell. It costs another $15 to store an unsold jacket for the season and then move it to the outlet store.
i. At what cost should the company charge the optimal order quantity to be 6000 units? (without the use of Z tables)
ii. If the company can ship them to Australia where summer begins in December, at a cost of $25 per unit including the holding cost and a price of $110 per unit in US dollars, what will the order quantity be if you plan to charge $200 per unit in the US?
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