Question

# Question 1 Inventory Management for Supply Chain T&D sells fresh strawberries to a local supermarket.

T&D's variable cost per box of the strawberries is $100 and the wholesale price is $150 per box. The supermarket sells the strawberries for $240 per box. Suppose the supermarket forecast for daily sales can be described with the following table: Demand (in box) Probability 70 10% 80 15% 90 15% 100 10% 110 25% 120 15% 130 10% Assume that the supermarket places one order only in the morning every day to fulfill the demand. Strawberries left over at the end of each day are sold at $30 per box by the supermarket to a food processing plant. Assume that the demand of the strawberries of the food processing plant is very large which can buy all the strawberries provided by the supermarket. a. How many strawberries should the supermarket order to maximize its expected profit? b. What is the supply chain's expected profit (the sum of T&D's profit and the supermarket's profit) given your answer in part a? c. Suppose T&D accepts the supermarket's return and gives a 60% credit for each returned grill, that is, T&D pays the supermarket $90 for each box of returned strawberries. T&D also salvage the left over at the price of $30. Under this return policy, how may boxes of strawberries should the supermarket order to maximize his expected profit? d. What is the supply chain's expected profit given your answer in part c? e. If T&D and the supermarket merge and become one firm, how many boxes of strawberries should the new company produce to maximize its expected profit? What is the maximum expected profit?

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