Leah Sanchez is concerned that if she orders too few calendars, customers disappointment in not finding a

Question:

Leah Sanchez is concerned that if she orders too few calendars, customers’ disappointment in not finding a calendar might drive them to shop elsewhere, resulting in more of a loss over the long term than just the $9.00 of lost profit on the calendar. Modify the model in Figure11.7 by adding a row that calculates unmet demand (number of calendars not sold, but could have been if a sufficient number were ordered). Assume Leah assigns $3.00 to each unmet-demand calendar as the additional opportunity cost due to future lost sales. For example, if Leah ordered 650 calendars and 700 are demanded, 50 calendars is the unmet demand and $150 is the additional opportunity cost. Incorporate this additional cost into your model. How many calendars would you recommend that Leah order based on this new model?

Annual Calendar Sales Cost per Calendar $5.95 Retail Price per Calendar $14.95 Refund per Calendar $1.95 Order Quantity

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...