A toy store is considering stocking a new toy that has just been released in the market. To test the marketability of the toy, the toy store will place an initial single order for the toys. Each toy costs €8.00, and any unsold toys will have to dispose of at the end of a trial period. The margin from each toy is €4.00, and children are likely to go to competitor toy stores if they run out of this toy. The demand for the toy is forecast to be normally distributed with a mean of 30,000 and a standard deviation of 10,000.
a. How many toys should be ordered in advance of the trial period?
b. An issue has been raised that customers who go to competitor toy stores may be lost for the long term. It has been estimated that the cost of not having toys in stock is €7 per stockout because of the loss of current and future sales. How does this information affect the number of toys to be ordered?