Question: A ski jacket sells for $ 3 5 0 a piece and costs the mountain lodge retailer $ 2 0 0 to procure. Unsold jackets
A ski jacket sells for $ a piece and costs the mountain lodge retailer $ to procure. Unsold jackets at the end of the season are sold online for $ a piece. There is an average warranty cost to the retailer of $ per jacket sold due to some customers returning the jackets This warranty cost is not incurred for the jackets sold online at the end of the season. Demand for the jackets can be assumed normally distributed with mean of and stdev of jackets over the season. The retailer can only order the jackets once, and a few months before the winter season begins at the lodge at that.
What is the optimal service level reported as a probability between and for the ski jackets at the retailer?
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