Business, 08.04.2020 04:35, shadowsnake
The Limited offers the sweaters to Fashionables at the wholesale price of $40 per sweater and Fashionables plans to sell each sweater at the retail price of $70 per unit. The Limited delivers orders placed by Fashionables in truckloads at a cost of $10,000 per truckload. The transportation cost of $10,000 is borne by Fashionables. Assume unless otherwise specified that all the sweaters ordered by Fashionables will fit into one truckload. Also assume that all other associated costs, such as unpacking and handling, are negligible. The Limited does not accept any returns of unsold inventory. However, Fashionables can sell all of the unsold sweaters at the end of the season at the fire-sale price of $20 each. For questions below, round answers to two decimal places when necessary.
1a) How many units of each sweater type should Fashionables order to maximize its expected profit?
1b) If Fashionable orders according to the optimal order quantity derived from the newsvendor model, what is the expected lost sales?
1c) If Fashionable orders according to the optimal order quantity derived from the newsvendor model, what is the expected leftover stock?
Answers: 1
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