The Knitting Company (TKC) is planning production for its four sweater styles that are popular during Christmas.
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Question:
The Knitting Company (TKC) is planning production for its four sweater styles that are popular during Christmas. All four styles have demand that is normally distributed. The best-selling style has an expected demand of 30,000 and a standard deviation of 5,000. Each of the other three styles has an expected demand of 10,000 with a standard deviation of 4,000. Currently, all sweaters are produced before the start of the season. Production cost is $20 per sweater, and they are sold for a wholesale price of $35. Any unsold sweaters at the end of the season are discounted to $15, and they all sell at that price. It costs $2 to hold the sweater in inventory for the entire season if it does not sell.
- How many sweaters of each type should TKC manufacture?
- What is the expected profit from this policy?
- How many sweaters does TKC expect to sell at a discount?
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