Nordic Inc. Newsvendor Model has designed four ski boot styles it plans to sell in the next winter season: Terrain, Blizzard, IceFix, and Freezdom. Nordic can produce some ski boot styles well in advance of the selling season, with the remaining styles produced after the next Ski Elite Athletes Trade (SEAT) that occurs before the selling season. At the time it makes its initial production decision, Nordic's forecast for each boot's demand is normally distributed with means and standard deviations listed in the table below. Boot Price Demand Mean Demand Std.Dev. Marginal cost of excess Marginal cost of shortage Terrain 200 100 30 16 48 Blizzard 150 150 50 20 60 IceFix 120 200 70 9.6 28.8 Freezdom 100 300 50 8 24 (a) What is Nordic's expected profit if Nordic chooses to produce all four boot styles before the SEAT show? At this time, Nordic would use a Newsvendor model for each boot using the data given in the table and determine optimal order quantity and optimal expected profit for each boot. (b) After the trade show and before it makes the final production decision, Nordic will know exact demand for each boot. If Nordic chooses to produce every boot style after the SEAT show (and assuming that all of its production arrives by the start of the selling season) then Nordic will be able to produce exactly what the demand is and there will be no mismatch cost in expected profit calculations. What will be the total expected profit in this case? (c) More realistically, it is unlikely that Nordic has enough capacity after the SEAT show to produce all it need. Because the SEAT show concludes shortly before the selling season, Nordic has limited capacity for production after the show. As a result, it needs to produce at least 300 pairs of boots before the show. Recall that each boot style is produced either before or after the

shoe (that is, no style is produced both before and after the show). Which style would you produce before the show and why? A qualitative answer is sufficient.