LifeKicks Jacbobs sneakers cost $40 per pair from the supplier and are sold by LifeKicks at $80 per pair during their peak fall selling season. Shoes not sold during the fall are moved to the LifeKicks outlet store and sold at the discounted price of $25. The demand is normally distributed with a mean of 100 and standard deviation of 20. What is the optimum order quantity? Choose the closest answer. a) 100 b) 105 c) 110 d) 115
(Solved Homework): LifeKicks Jacbobs sneakers cost $40 per pair from the supplier and are sold by LifeKicks at…
Expert Answer
Given Price P = $80
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(Solved Homework): LifeKicks Jacbobs sneakers cost $40 per pair from the supplier and are sold by LifeKicks at…
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Cost C = 40
Salvage cost V = $25
Overage cost Co = Cost – Salvage Value = 40-25 = 15
Underage cost Cu = Price – Cost = 80-40 = 40
Critical ratio p = Cu/(Cu+Co) = 40/(40+15) = 0.72
Z = normsdist(0.72) = 0.76
Optimal Order Quantity Q
Mean = 100
Standard deviation = 20
Q = 100+(0.76*20) = 100 + 15.2 = 115.2 or 115
d) 115
