Case Study 2; Specialty Toys, Inc. sells children’s toys. Specialty Toys,

 

Specialty Toys, Inc. sells children’s toys. Specialty Toys, Inc. has a new toy coming out for the Holiday season called the Weather Teddy. The Weather Teddy has a built in barometer inside so when a child presses the button on the bear’s hand, the system syncs with the barometer and gives a set of responses about the weather.

Specialty Toys, Inc. is trying to figure out how many Weather Bear Teddies to order to be prepared for the holiday season. A senior sales analyst at Specialty predicts that the average demand of the bears is expected to be 20,000 units with a standard deviation of 5102.

If the distribution is normally distributed, answer the following questions below:

1. The 4 members of the management team came up with suggested order quantities. If the average demand of the bears is expected to be 20,000 units with a standard deviation of 5102, determine the stock-out for each members suggested order quantity.
a. Tom suggests the team order 15,000 units
b. Bill suggests the team order 18,000 units
c. Sue suggests the team order 24,000 units
d. Tracey suggests the team order 28,000 units

2. At the end of the holiday season, the team analyzed the amount of sales and discovered that only 20,000 units were actually sold. Based on the suggestions from question #1, what would be the expected profit or loss for each order suggestion if the sales price of each unit is $24 & the cost of each unit is $16?
a. Tom suggests the team ordered 15,000 units
b. Bill suggests the team order 18,000 units
c. Sue suggests the team order 24,000 units
d. Tracey suggests the team order 28,000 units

3. Based on your calculations from question #2, which one of the members of the management team had the highest amount of profit? Explain.

4. If the average demand of the bears is still expected to be 20,000 units with a standard deviation of 5102, determine the number of units that should be ordered if the team only wants a 30% stockout. (Hint: Use NORM.INV function in Excel)
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