A retailer of fine crystal has decided to stock a commemorative bird for the New Year. Each bird will retail for $200. At that price, demand for the season is expected to follow a normal distribution with a mean of 10,000 and a standard deviation of 275.

The retailer will purchase the crystal birds from a manufacturer who charges $80 per bird. The retailer can only place one order with the manufacturer in October. The order is delivered in mid-November. Any unsold birds after the New Year are discounted down to $40, and they all sell at this price. However, if the retailer sells out before the new year, there is no way to get additional birds.

Use the Newsvendor model to estimate how many birds the retailer should order in October.

Answer rating: 100% (QA)

The retailer has two possible decisions to make Order 10000 birds Order 12750 birds Decision 1 Order ... View the full answer