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Questions for the Flanders Case: Read the Flanders Case, Part (B). Please note :

Questions for the Flanders Case:

Read the Flanders Case, Part (B).  Please note: that for this assignment, all sweaters are purchased by Flanders from Homeric for $35 per sweater (i.e., ignore the cost of $40 for the first 1000 sweaters - treat all sweaters as costing $35 independent of order size).

In the questions for the case, contribution refers to the gross profit associated with each choice of inventory level.  Thus, if the inventory level were chosen to be 600 and the demand that occurred were for 1200 sweaters, then the contribution (profit) for that demand outcome would be (600 x (100-35)) = $39,000.  This is due to the fact that even though demand is 1200, we have only 600 sweaters available to sell.

In the questions, expected contribution thus requires a computation similar to the description in the next section of this note.


1.      Answer Questions 3a.through 3d.

2.      For each possible inventory level that you would choose (i.e., 600,1200 or 2400), generate the expected contribution for that inventory decision.

3.      Answer Questions 4b through 4d.

4.      Answer Question 5.

.   3a. What is the contribution if demand is 600 sweaters? 

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