Answered: 5. Snoblo, a manufacturer of…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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How do I do question 5?

Transcribed Image Text:Exercises 1. Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. Each unit costs $150 to manufac- ture, and the introductory price is $200. At this price, the anticipated demand is normally distributed, with a mean of µ = 100 and a standard deviation of o = 40. Any unsold units at the end of the season are unlikely to be valuable and will be disposed of in a post-season sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the expected profit from this policy? On average, how many customers does Green Thumb expect to turn away because of stocking out? 2. The general manager at Green Thumb decides to conduct extensive market research for its new product. At the end of the market research, the manager estimates demand to be normally distributed, with a mean of u = 100 and a standard deviation of o = 15. How should Green Thumb alter its pro- duction plans in Exercise 1 as a result of the market research? How much increase in profit is it likely to observe? How does the improved forecast affect the demand lost by Green Thumb because of understocking? Use cost and price infor- deviation of 10,000. Each jacket sells for $60 and costs $30 to produce. Any leftover jackets at the end of the season are sold for $25 at the year-end clearance sale. Holding jackets until the year-end sale adds another $5 to their cost. A recent recruit has suggested shipping leftover jackets to South America for sale in the winter there rather than running a clearance. Each jacket will fetch a price of $35 in South America, and all jackets sent there are likely to sell. Shipping costs add $5 to the cost of any jacket sold in South America. Would you recommend the South American option? How will this decision affect production decisions at Champion? How will it affect profitability? On average, how many jack- ets will Champion ship to South America each season? 5. Snoblo, a manufacturer of snowblowers, sells four models. The base model, Reguplo, has demand that is normally dis- tributed, with a mean of 10,000 and a standard deviation of 1,000. The three other models have additional features, and each has demand that is normally distributed, with a mean of 1,000 and a standard deviation of 700. Currently, all four models are manufactured on the same line at a cost of $100 for Reguplo and $110 for each of the other three models. Reguplo sells for $200, whereas each of the other three mod- els sells for $220. Any unsold blowers are sold at the end of the season for $80. Snoblo is considering the use of tailored sourcing by setting up two separate lines, one for Reguplo and one for the other three. Given that no changeovers will be required on the Reguplo line, the production cost of Reguplo is expected to decline to $90. The production cost of the other three products, however, will now increase to $120. Do you recommend tailored sourcing for Snoblo? How will tailored sourcing affect production and profits? Ignore holding costs mation from Exercise 1. 3. The manager at Goodstone Tires, a distributor of tires in Illi- nois, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inven- tory of tires drops to 6,000. Weekly demand for tires is nor- mally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 per- cent. How much safety inventory does Goodstone currently carry? At what cost of understocking is the manager's current inventory policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin? 4. Champion manufactures winter fleece jackets for sale in the United States. Demand for jackets during the season is normally distributed, with a mean of 20,000 and a standard for the snowblowers. 6. AnyLogo supplies firms with apparel containing their logo to be used for promotional purposes. AnyLogo has four major customers-IBM, AT&T, HP, and Cisco. During the holiday season, the logos are adorned with a Christmas motif. Demand from each firm for apparel with the Christmas motif is normally distributed, as shown in Table 6.

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