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Benetton has entered a contract with a retailer for a seasonal product. The retailer’s sales price is $50 per unit of product. Benetton’s sales price to the retailers is $34 per unit. Any unsold units can be sold by the retailer to a third party at a salvage value of $25 per unit. The retailer forecasts demand to be normally distributed, with a mean of 8500 and a standard deviation of 1500 units. The retailer has ordered 9040 units. The expected under-stock (sales lost) for this order is 368 units. Benetton’s production cost is $23 per unit. Hint: You do not need to use any formula to compute the expected under-stock. It has already been computed and provided to you.
1. Compute the expected number of units sold by the retailer.
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Order Paper NowA: 5060 units. B: 8511 units. C: 7356 units. D: 8132 units. E: 8469 units.
2. Compute the expected fill rate.
A: 92%. B: 94.6%. C: 98.1%. D: 89.7%. E: 95.7%.
3. Compute the expected over-stock (leftover).
A: 1300 units. B: 1759 units. C: 908 units. D: 1596 units. E: 1661 units.
4. Compute the expected profit for the retailer.
A: $105840. B: $262989. C: $198372. D: $127418. E: $121940.
5. Compute the expected profit for Benetton.
A: $102640. B: $199555. C: $99440. D: $162384. E: $211725.
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