Assignment:
Jenna's gift shop places orders for Christmas items during a trade show in July. One item to be ordered is a silver tree ornament. The ornament will sell for $80. The best estimate for demand is:
Demand 5 6 7 8
Probability .2 .25 .3 .25
The ornaments cost $55 each when ordered in July. Ornaments unsold by Christmas are marked down to half price and always sell during January.
How many ornaments should Jenna order?
What is the expected profit if Jenna orders the optimal order size?
If Jenna orders the optimal order size, what fill rate is being expected?
If Jenna orders the optimal order size, what service level is being offered?
How many units should Jenna order to be able to have the expected number of units sold equal to the expected demand? What is the expected overstock cost?