Specialty Toys, Inc., sells a variety of new and innovative children's toys. As with other products, Specialty faces the decision of how may Weather Teddy units to order for coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team ask you for analysis of the stock-out probabilities for various order quantities, an estimate of the product potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similar products, Specialty%u2019s sales forecaster predicted and expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units. Prepare a managerial Report that addresses the following issues and recommends an order quantity for the Weather Teddy product. One of Specialty's manager felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be order under this policy, and what is the projected profit under the three sales scenarios?

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Chapter1: Combinatorial Analysis
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Specialty Toys, Inc., sells a variety of new and innovative children's toys. As with other products, Specialty faces the decision of how may Weather Teddy units to order for coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team ask you for analysis of the stock-out probabilities for various order quantities, an estimate of the product potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similar products, Specialty%u2019s sales forecaster predicted and expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units. Prepare a managerial Report that addresses the following issues and recommends an order quantity for the Weather Teddy product.

One of Specialty's manager felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be order under this policy, and what is the projected profit under the three sales scenarios?

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