Introduction to Statistics and Econometrics Essay

1. Specialty faces the decision of how many Weather Teddy units to golf-club for the coming holiday season. Members of the management team suggested order quantities of 15000, 18000, 24000 or 28000 units. The wide range of order quantities suggested indicate considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities,an estimate of the value potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on a comprise of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit After reviewing the gross revenue history of similar products, Specialtys senior gross revenue forecaster predicted an expected demand of 20,000 units with a 0.95 probability that demand would be between 10,000 units and 30,000 units. Questions1. rough the demand distribution using Nor mal distribution and sketch the distribution. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the communicate profit for the order quantities suggested by the management team under three scenarios worst case in which sales is 10,000 units, most likely case in which sales is 20,000 units and best case in which sales is 30,000 unitsQuestions1. One of Specialtys managers felt that the profit potential was so great that the order quantity should endure a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the threesales scenarios? 2. Provide your own recommendation for an order quantity and note the associated profit projections.