Land’s End is deciding how many sunglasses to order from a small manufacturer. One option under consideration would have the manufacturer sell the sunglasses to Land’s End for $75 and credit Land’s End $58 for each unit left unsold and returned at the end of the season. Because styles change so much every year the returned sunglasses would have essentially no value. Land’s End will sell the sunglasses for $110 each. The cost to manufacture the sunglasses is $30 per pair. Q&A with different #
a. What is Land’s End cost of being overstocked on these sunglasses? Cost of being understocked?
b. If Land’s End assumes that the demand for the sunglasses is normally distributed with a mean of 300 and a standard deviation of 150, how many units should they (Land’s End) purchase from the manufacturer to maximize its (Land’s End) expected profit? What is the expected profit for the Q*?
c. What will be the manufacturer’s expected profit if Land’s End orders 325 pairs of sunglasses?
Multiple choices. Protection levels are not useful when?
a- Low fare customers book their tickets before high fare customers.
b- Low fare customers are significantly hard to bump once they hold a reservation.
c- Overall demand is much lower than capacity.
d- Fare values fluctuate.
e- Low fares sell at about 75% of the value of high fares.