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P13_L18_Parkas - OM335Fall2008 P13:Parkas . Parka Price Co...

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OM 335 Fall 2008 edeb08453eb27b7745aa38ebd597c8ba76a0ff21.doc P13: Parkas  A firm sells five women’s ski parkas. Some data on those parkas are listed below: Parka Price µ σ Co Cu Q Expected Profit A $220 1,000 300 35.2 52.8 1,20 2 $41,740 B 205 2,000 800 28.7 49.2 2,54 0 73,618 C 190 3,000 1500 22.8 45.6 4,01 2 98,429 D 175 2,000 1200 17.5 42.0 2,80 9 59,186 E 160 1,000 700 12.8 38.4 1,47 2 27,001 Q  in the above table is the optimal newsvendor quantity and “Expected Profit” is the newsvendor  expected profit if  Q  is ordered.  µ  is the average demand and   is the standard deviation of the σ   demand. The firm will produce some parkas well in advance of the selling season. The other  parkas are produced after a trade show that occurs shortly before the season starts. After  attending the trade show, the firm will basically know demand for each parka. Unfortunately, the  firm’s capacity is limited after the trade show, so the firm wants to produce at least 5,000 parkas  before the trade show. Furthermore, a parka should be produced either before the trade show or  after the trade show, but a parka should not be produced in both production opportunities.
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