BBQ King is making its stocking decision for the latest model of barbeque for the upcoming...
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BBQ King is making its stocking decision for the latest model of barbeque for the upcoming summer season. This barbeque sells for $2500 and BBQ King can purchase each unit for $1800. Any unsold barbeques at the end of the season will be sold at the discount price of $1250. BBQ King estimates that the demand for this new barbeque will be normally distributed with mean 200 and standard deviation 25. (C1). Using the newsvendor model, calculate BBQ King's critical fractile. Show the answer with two decimal places. (3 marks) (C2). Based on Question (C1), how many barbeques should BBQ King order? (3 marks) (C3). List all assumptions you got directly from the question description in order to complete Questions (C1) and (C2). (4 marks) (C4). List and justify all additional assumptions you needed to make. From this list, choose two assumptions that you don't like the most, and explain how relaxing them would change the decision for BBQ King. (10 marks) (C5). The supplier who sells the barbeque to BBQ King sources the barbeque at a cost of $1300. Now suppose this supplier directly sells to end consumers at the same retailing price of $2500. Again, any unsold barbeques at the end of the season will be sold at the discount price of $1250. Without doing any calculation, do you think the supplier should order more or less than BBQ King (i.e., the answer for Question (C2))? Why? (5 marks) (C6). Now perform the newsvendor model calculation based on information given in Question (C5). How many barbeques should the supplier order? (5 marks) BBQ King is making its stocking decision for the latest model of barbeque for the upcoming summer season. This barbeque sells for $2500 and BBQ King can purchase each unit for $1800. Any unsold barbeques at the end of the season will be sold at the discount price of $1250. BBQ King estimates that the demand for this new barbeque will be normally distributed with mean 200 and standard deviation 25. (C1). Using the newsvendor model, calculate BBQ King's critical fractile. Show the answer with two decimal places. (3 marks) (C2). Based on Question (C1), how many barbeques should BBQ King order? (3 marks) (C3). List all assumptions you got directly from the question description in order to complete Questions (C1) and (C2). (4 marks) (C4). List and justify all additional assumptions you needed to make. From this list, choose two assumptions that you don't like the most, and explain how relaxing them would change the decision for BBQ King. (10 marks) (C5). The supplier who sells the barbeque to BBQ King sources the barbeque at a cost of $1300. Now suppose this supplier directly sells to end consumers at the same retailing price of $2500. Again, any unsold barbeques at the end of the season will be sold at the discount price of $1250. Without doing any calculation, do you think the supplier should order more or less than BBQ King (i.e., the answer for Question (C2))? Why? (5 marks) (C6). Now perform the newsvendor model calculation based on information given in Question (C5). How many barbeques should the supplier order? (5 marks)
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Answer rating: 100% (QA)
C1 The critical fractile also known as the critical ratio is the ratio of the shortage cost to the total cost It represents the proportion of demand that should be met to maximize expected profit In t... View the full answer
Related Book For
Managerial Statistics
ISBN: 9780534389314
1st Edition
Authors: S. Christian Albright, Wayne L. Winston, Christopher Zappe
Posted Date:
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