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2. Zara is determining how many coats to order for this upcoming winter selling season. Zara forecasts the demand distribution for coats this upcoming winter to be the following. Demand (number of coats) Probability 100 0.2 150 0.1 200 0.2 250 0.1 300 350 0.1 0.3 Each coat costs Zara $100 to purchase wholesale and sells for $200 retail. At the end of the winter selling 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 it profitable 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 it profitable 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?

2. Zara is determining how many coats to order for this upcoming winter selling season. Zara forecasts the demand distribution for coats this upcoming winter to be the following. Demand (number of coats) Probability 100 0.2 150 0.1 200 0.2 250 0.1 300 350 0.1 0.3 Each coat costs Zara $100 to purchase wholesale and sells for $200 retail. At the end of the winter selling 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 it profitable 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 it profitable 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?

Practical Management Science
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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2. Zara is determining how many coats to order for this upcoming winter selling season. Zara forecasts the demand distribution for coats this upcoming winter to be the following. Demand (number of coats) Probability 100 0.2 150 0.1 200 0.2 250 0.1 300 350 0.1 0.3 Each coat costs Zara $100 to purchase wholesale and sells for $200 retail. At the end of the winter selling 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 it profitable 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 it profitable 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?
Transcribed Image Text:2. Zara is determining how many coats to order for this upcoming winter selling season. Zara forecasts the demand distribution for coats this upcoming winter to be the following. Demand (number of coats) Probability 100 0.2 150 0.1 200 0.2 250 0.1 300 350 0.1 0.3 Each coat costs Zara $100 to purchase wholesale and sells for $200 retail. At the end of the winter selling 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 it profitable 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 it profitable 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?
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