You are the Director of Operations of Second Best Buy, a retail chain, and you are planning the purchase of TVs for the first quarter of 2018. You will be buying 30" 1080i TVs and 42" 4K TVs. Last week, the marketing department delivered the following sales forecast:

• 1080i TVs
  • 1. The demand will follow a normal distribution with a mean of 2000 sets/quarter and a standard deviation of 300 sets/quarter.
    2. The sale price, product cost, and salvage value of the TVs are respectively $800/set, $400/set, and $300/set.
• 4K TVs
  1. The sale price, product cost and salvage value are respectively $2000/set, $1000/set, and $900/set.
  2. We do not have historic sales data for 4K TVs. Instead, we consider the following three scenarios:
     • Good: demand = 1200 sets/quarter, with probability 0.35.
     • Fair: demand = 800 sets/quarter, with probability 0.50.
     • Poor: demand = 400 sets/quarter, with probability 0.15.

Part 1

0.0/3.0 points (graded)

Assuming the objective is to maximize profit.

What is the optimal number of 30" 1080i TVs to buy? (Round to nearest integer)

Part 2

0.0/4.0 points (graded)

(Hard)

Assuming the objective is to maximize profit.

What is the optimal number of 4K TVs to buy? (Round to nearest integer)

What is the maximum expected profit? unanswered

Part 3

0.0/4.0 points (graded)

Continued from parts 1 and 2.

After we determine the purchase contract size of each product type, we will workout the order policy. The supply chain department provided the following data. The inventoryholding cost of both product types is $200/set/quarter. The ordering cost of both product types is $1000 per order.

Assume the demand over YR2018 Q1 is constant.

What is the optimal quantity per order for 1080i TVs? (Round to nearest integer) unanswered

What is the optimal quantity per prder for 4K TVs? (Round to nearest integer)

Part 4

0.0/4.0 points (graded)

What is the total cost for inventory holding and order placement for 1080i TVs during YR2018 Q1?

What is the total cost for inventory holding and order placement for 4K TVs during YR2018 Q1?

A music store is restocked weekly. The weekly demand for a best-selling CD is normal, with mean of 200 and standard deviation of 50. These CDs cost $8.00 per piece, and the store earns $4.50 per CD sold. Excess demand is lost (salvage value is $0); Customers go to a competitor's store rather than wait for resupply.

Part 1

0.0/7.5 points (graded)

What is the order quantity that will maximize profit?

Suppose that exactly 10% of the start-of-week inventory of this CD disappears from the store without being sold; this is euphemistically known as a 10% shrinkage rate. Now, what order quantity maximizes expected profit?