Costume Gallery is a New-Jersey based catalogue retailer of dance costumes. These dance costumes are typically purchased by dance schools who further sell them to dance students. Dance performances are held in April, and demand for dance costumes is fully known in February. The value chain of the dance costume business is illustrated below:

A typical costume is purchased by Costume Gallery for $7 from overseas manufacturers (all costs inclusive), sold to dance schools for $30, who then sell it to students at $35. The timeline of activities in this industry is illustrated below:

Costume Gallery employs a team of fashion forecasters who continuously scan fashion and cultural trends. In January every year, this team gets together and develops a demand forecast. For a particular costume in the current catalogue, they estimate demand to be distributed normally with mean 5,000 units and standard deviation of 2,000 units. The costs and prices of this costume are in line with a typical costume described above. Further, we will assume that all units of this costume are sold through one particular dance school.

1. Based on the forecasts provided by the team of fashion forecasters, how many units of this costume should costume gallery order from its overseas suppliers?

 

Transcribed Image Text:

Nov Dec Jan Feb Mar April Students Overseas Demand is realized Deliveries Enroll in Orders Must Dance Schools Place Classes be Placed final orders Nov Dec Jan Feb Mar April Students Overseas Demand is realized Deliveries Enroll in Orders Must Dance Schools Place Classes be Placed final orders

Answer rating: 100% (QA)

When the Costume gallery sells a costume they make a profit of 23 per costu... View the full answer