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Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production
Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume that all ten styles in the sample problem are made in Hong Kong, and that Obermeyer's initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial analysis.)
Expert Solution
Answer:
To consider the standard deviation of demand, apply following rule for determining first-period production quantity:
P = Maximum (0, µ - kσ)
k = z-score to be determined for making total production quantity to be 10,000.
The Excel model, application of Goal Seek tool is as follows:
The k = 1.0608 value gives the total production quantity of 10,000 units as follows:
|
Determine value of k, that gives the total production quantity to be 10,000 |
|||
|
Value of k |
1.0608 |
||
|
Style |
Mean of demand |
Std. Dev. Of Demand |
First-period Production qty |
|
µ |
σ |
Max (0, µ - kσ) |
|
|
Gail |
1017 |
388 |
605 |
|
Isis |
1042 |
646 |
357 |
|
Entice |
1358 |
496 |
832 |
|
Assault |
2525 |
680 |
1804 |
|
Teri |
1100 |
762 |
292 |
|
Electra |
2150 |
807 |
1294 |
|
Stephanie |
1113 |
1048 |
1 |
|
Seduced |
4017 |
1113 |
2836 |
|
Anita |
3296 |
2094 |
1075 |
|
Daphne |
2383 |
1394 |
904 |
|
Total |
20001 |
10000 |
|
PFA
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