Benetton has entered into a quantity flexibility contract for a seasonal product with its retailer. If the retailer orders O units, Benetton is willing to provide up to another 35 percent if needed. Benetton's production cost is $24 and they charge the retailer a wholesale price of $40. The retailer prices to customers at $55 per unit. Any unsold units can be sold at a salvage value of $25 by the retailer. Benetton can only salvage $10 per unit for its left over inventory. The retailer forecasts demand to be normally distributed with a mean of 5,000 and a standard deviation of 1,800

a How many units O should the retailer order? b What is the expected quantity purchased by the retailer (recall that the retailer can increase the order by up to 35 percent after observing demand)? c What is the expected quantity sold by the retailer? d What is the expected overstock at the retailer? e What is the expected profit for the retailer? f What is the expected profit for Benetton?