2. Zara is determining how many coats to order for this upcoming winter selling season. Zaraforecasts the demand distribution for coats this upcoming winter to be the following.Demand(number of coats)Probability1000.21500.12000.22500.10.10.3300350Each coat costs Zara $100 to purchase wholesale and sells for $200 retail. At the end of the winterselling season, Zara may sell as many coats as it desires at a salvage value of $50 per coat.a. Suppose that Zara has purchased 250 coats, what is the marginal value from a 251st coat? Is itprofitable for Zara to purchase its 251st coat? Justify your answer.b. Suppose that Zara has purchased 260 coats, what is the marginal value from a 261st coat? Is itprofitable for Zara to purchase its 261st coat? Justify your answer.c. What is the optimal number of coats for Zara to purchase in order to maximize its average profit?

To solve this problem, we need to calculate the expected profit for each additional coat, starting…

Answered: 2. Zara is determining how many coats…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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SHORT ANSWER - Linear programming model (Management Science)
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Three years ago, Barbara Jones started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Barbara sells the baskets for $ 29 each, and her variable costs are $ 19 per basket. She incurs $ 12,500 in fixed costs each year. Last year, Barbara sold 4,000 baskets, and she believes that demand this year will be stable at 4,000 baskets. The following are the actions Barbara could take if she wants to earn $ 30,900 in operating income by selling only 4,000 baskets. Consider each action independently. (Round per unit answers to 2 decimal places, e.g. 52.75 and fixed cost to 0 decimal places, e.g. 5,275.) Raise selling price per unit to? Reduce variable costs per unit to? Reduce fixed costs to?
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A shop is planning an order for a popular Christmas festive season product. Demand for the product usually starts from first week of December till first week of January and reduces sharply thereafter. For this reason, and to stimulate sales for leftovers, the product is sold at a significantly reduced price from the second week of January to the fourth week of January. Any leftover after the fourth week of January goes waste. The table below gives past data on total demand for the period from first week of December to first week of January, and from second week of January to fourth week of January, together with their respective chances of occurrence. The product can be purchased at a wholesale price of GHS60 per unit for a pack containing 600 products, GHS57 per unit for a pack containing 800 products, and GHS52 per unit for a pack containing 1000 products. The shop plans to sell the product for GHS80 per unit from first week of December to first week of January, and at a reduced…

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