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ARE 157
Winter 2011
M.Whitney
ANALYSIS FOR PRODUCTION MANAGEMENT
Homework 3Due Wednesay., March.2nd,
in class
(10)
1.
Shelly sells Valentine bouquets by the roadside on Valentine
=
s Day.
Each bouquet sells for $16.50.
The
flowers she uses for each bouquet cost $9 wholesale, while the plastic heart, ribbon and tissue paper she uses for each
bouquet costs $1.50.
If any bouquets don
=
t sell, she discards the flowers (but doesn
=
t need to use or discard the
ribbon/tissue).
wrap the bouquets or ring them up if they are donated.
Based on past sales experience, Shelly knows the probability of selling various quantities of papers is:
# of bouquets
P(d)
P(D)
26
0
27
.10
28
.10
29
.20
30
.25
31
.15
32
.10
33
.06
34
.04
35 or more
0
a..
Find P(D), the probability of
A
stocking out
@
(selling every bouquet in stock) for each level of bouquets stocked.
b.
What is the optimal probability of stocking out?
How many bouquets should Shelly prepare for Valentine
=
s Day?
c.
About how many bouquets does she expect to sell on an
A
average
@
Valentine
=
s day (keeping in mind that
sometimes she runs out)?.
How many does she expect to discard an average Vday?
What is her total profit on an
average Vday?
(10)2.
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 Spring '08
 WHITNEY

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