A summer intern has been asked to analyze purchasing options so orders can be placed for snow-blowers in advance of the winter season. Orders can be placed to one of two suppliers. Supplier 1 charges $350/unit but can only deliver prior to the start of the season. Supplier 2 charges $400/unit but can deliver again after the start of the season. The snow-blowers are to be priced at $600/unit during the season, but any left over at the end of the season are expected to be marked down to $325/unit. Given the last winter, the intern is sensitive to the risk of not being able to react in real time to weather conditions while balancing this with the higher cost of supplier 2.

1.

a) If ordering from supplier 1 the order would be based on expected demand of 3,000 units with a standard deviation of 600. If supplier 2 is used, the initial order would be based on expected demand of 500 units with standard deviation of 75. For each supplier, how many snow-blowers will be ordered?

b) After discussions with the purchasing manager, it was decided to use supplier 2. In getting ready to make a second order, expected demand for the remainder of the season is for 2,500 units with a standard deviation of 250. How many more snow-blowers should be ordered? (Hint: Dont forget how the first order worked out).

c) Will using supplier 2 lead to higher or lower profit that using supplier 1, and by how much?