Suppose that Dr. Su really want to get out of academia for more $$ but driving...

50.1K

Verified Solution

Question

General Management

Suppose that Dr. Su really want to get out of academia for more$$ but driving for Uber may not be ideal for him. He decides tostart a new business and now sells sunglasses to a retailer calledUltimate Vision (UV). UV purchases each one of the pairs ofsunglasses from Dr. Su for $75 and retails them for $115. Dr. Su’ssourcing cost from Alibaba is $35. At the end of the season, UVestimates the salvage value is only about $25 each pair. UVbelieves this season’s demand can be represented by a normaldistribution with a mean of 250 and a standard deviation of125.
The following is the supply chain:
Alibaba --> Dr. Su’ store --> UV retail -->customers
(a) What is UV’s optimal order quantity?
(b) What is Dr. Su’s profit when UV order at optimal?
(c) From a maximize-your-own-profit perspective, should UV orderat a different amount than (a), (state your reason)?
(d) Consider Dr. Su's store and UV retail store as a singleentity, what is the optimal order quantity for the singleentity?
(e) What can Dr. Su do to encourage UV order at the amount in(d)?

Answer & Explanation Solved by verified expert

4.2 Ratings (499 Votes)

a What is UVs optimal order quantity Cost 75 Price 115 Salvage price 25 Demand distribution Mean demand u 250 Standard Deviation of demand s 125 Overage cost is the perunit cost of over ordering Underage cost is the perunit opportunity cost of ordering below demand Cost of Overage Co cost salvage 75 25 50 Cost of Underage Cu Price cost 115 75 40 STEPS Find critical ratio then Find z value using critical ratio Convert Z into order quantity Q u zstandard deviation Service level required Critical ratio FQ CuCu Co 404050 04444 Now See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member