Calculate the expected stockout cost for the following scenario.

How would your stockout costs change under the following scenarios? Please treat each scenario as independent from the others.

Scenario #1: A new competitor enters the market, offering a product that doubles defections. That is, among customers who try the new rival's product, twice as many switch permanently.

Scenario #2: You modify your product/service offering so that only half as many customers are willing to buy from a rival. Among those who do buy elsewhere, the mix of lost sales/lost customers remains the same.

Scenario #3: More refined analysis reveals that the $50,000 cost of a lost customer is too low. The real costs are $250,000.

Customer Response	Probability	Cost per Incident
Back Order	.50	$150
Lost Sale	.40	$2,500
Lost Customer	.10	$50,000