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Snoblo, a manufacturer of snow blowers, sells four models. The base model, Reguplo, has demand that is normally distributed, with a mean of 10,000...
Snoblo, a manufacturer of snow blowers, sells four models. The base model, Reguplo, hasdemand that is normally distributed, with a mean of 10,000 and a standard deviation of1,000. The three other models have additional features, and each has demand that is normallydistributed, with a mean of 1,000 and a standard deviation of 700. Currently all fourmodels are manufactured on the same line at a cost of $100 for Reguplo and $110 for each ofthe other three models. Reguplo sells for $200, whereas each of the other three models sellsfor $220. Any unsold blowers are sold at the end of the season for $80. Snoblo is consideringthe use of tailored sourcing by setting up two separate lines, one for Reguplo and one for theother three. Given that no changeovers will be required on the Reguplo line, the productioncost of Reguplo is expected to decline to $90. The production cost of the other three products,however, will now increase to $120. Do you recommend tailored sourcing for Snoblo? How willtailored sourcing affect production and profits? Ignore holding costs for the snow blowers.
