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Specialty faces the decision of how many Weather Teddy units to order for coming holiday season. Members of the management team suggested order...
Specialty faces the decision of how many Weather Teddy units to order for coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team ask you for analysis of the stock-out probabilities for various order quantities, an estimate of the product potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similar products, Specialty’s sales forecaster predicted and expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units.Prepare a managerial Report that addresses the following issues and recommends an order quantity for the Weather Teddy product.1.
