An American retailer buys the winter-coats for $50 each from a regional supplier and sells them for $250 each during the regular season. The demand for the winter-coats is forecasted with normal distribution of 400 on the average and the variability is expressed with 100 units. Any winter coat left unsold in the regular winter season, can be sold at a discount house for $30, but the retailer must pay for the transportation cost to the discount store with 50 cents per dollar invested originally. In the case that demand is more than the initial procurement from the regional supplier, a second procurement is possible. However, the supplier increases the whole-sale price to $100 from the original $50 each. 

Find the unit understocking (Cu) and the unit overstocking (Co) costs for the American retailer. Show the mathematical algebra.

Answer rating: 100% (QA)

The unit understocking cost Cu is the cost incurred when the retailer does not have enough winter co... View the full answer