Question
The manufacturer produces each grill at a cost of CHF 75. They set the wholesale price for each grill at VHF 200. The hardware store
The manufacturer produces each grill at a cost of CHF 75. They set the wholesale price for each grill at VHF 200. The hardware store then sells the grills to customers at a retail price of CHF 250 during the outdoor season. However, at the end of the season, any remaining grills are sold by the hardware store at a discounted price of CHF 95. The manufacturer is considering implementing a buyback contract for the hardware store. Under this contract, the hardware store can return any unsold grills to the manufacturer at a price of CHF 140 per grill. However, the hardware store incurs a shipping cost of CHF 2.50 per grill for returning the grills to the manufacturer.
- Assuming that the wholesale price of CHF 185 remains constant throughout the season, and the retailer's demand for grills follows a normal distribution with a mean of 500 and a standard deviation of 125, what is the expected entire supply chains profit under the proposed buyback contract? (Round your answer to the nearest integer)
- What is the optimal buy-back price?
- What is the total profit of the entire supply chain when the optimal buy-back price is implemented under the buyback contrac
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