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Homework_8_SupplyChainCoordination_Solution

# Homework_8_SupplyChainCoordination_Solution - 311...

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311 Operations Management Fall 2007 Homework 8: Supply Chain Coordination Due 11/29/2007 1. (30 pts) You make special anniversary edition of USC T-shirts and sell them to the USC bookstore for \$13 per T-shirt. Each T-shirt costs you \$10 to produce. The bookstore charges \$15 per T-shirt. Assume holding costs are \$0. Also, any T-shirt not sold at the end of the semester is donated to Goodwill. Past sales statistics indicate the demand for T-shirts each semester is as follows: Demand 50 100 150 200 250 300 Probability 10% 20% 25% 25% 15% 5% a) (10 pts.) How many T-shirts will the USC bookstore (acting independently and optimally) stock? The target service level for the bookstore is (p–w)/(p+h)=2/15=13.3%. The bookstore will stock 100 T-shirts. b) (10 pts.) What is your profit? Your profit is 100*(13–10) = 300 c) (10 pts.) What is the bookstore’s profit? With probability 0.1, bookstore will sale 50 T-shirts. With probability 0.9, bookstore will sale 100 T-shirts. Bookstore’s profit is (0.1*50+0.9*100)*15 – 100*13 = 125 2. (30 pts.) You remember that a buy back price may help the profit of the chain and decides to offer a buy back price of \$12.

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