Operations Management

Question 4

Chapter 12: Dan’s Independent Book Store is trying to decide on how many copies of a book to purchase at the start of the upcoming selling season. The book retails at $30.00. The publisher sells the book to Dan at $20.00. Dan will dispose of all of the unsold copies of the book at 50% off the retail price, at the end of the season. Dan estimates that demand for this book during the season is Normal with a mean of 1200 and a standard deviation of 300.

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Suppose Dan wants to maximize his expected profits from the sale of this book. How many copies should he order from the publisher? Choose the closest answer.

a. Less than 1000
b. At least 1000 but less than 1100
c. At least 1100 but less than 1200
d. At least 1200 but less than 1300
e. At least 1300 but less than 1400
f. At least 1400 but less than 1500
g. At least 1500
h. Cannot say

10 points

Question 5

Chapter 12: Dan’s Independent Book Store is trying to decide on how many copies of a book to purchase at the start of the upcoming selling season. The book retails at $30.00. The publisher sells the book to Dan at $20.00. Dan will dispose of all of the unsold copies of the book at 50% off the retail price, at the end of the season. Dan estimates that demand for this book during the season is Normal with a mean of 1200 and a standard deviation of 300.

Suppose Dan orders 1300 copies. What is Dan’s expected profit? Choose the closest answer.

a. Less than 9500$
b. At least 9500$ but less than 9750$
c. At least 9750$ but less than 10000$
d. At least 10000$ but less than 10250$
e. At least 10250$ but less than 10500$
f. At least 10500$ but less than 10750$
g. At least 10750$

10 points

Question 6

Chapter 12: Suppose the news vendor model describes a firm’s operations decision. Is it possible to have positive expected lost sales and positive expected left over inventory? Choose the best answer.

a. No – if there is left over inventory then there should not be lost sales.
b. No – if expected lost sales is positive, then expected left over inventory must be negative.
c. No – actual demand can differ from sales.
d. Yes – they are both expectations over numerous possible outcomes, among which there will be no outcome in which both are positive.
e. Yes – as long as the underage cost is greater than the overage cost.

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