Note: This is not a Solver problem. Just change the Standard Deviation directly in Excel from 100 to 50 and then 150 to see the impact on profitability.

Using the Sportmart Demo Download Sportmart Demo, answer the following questions.

The manager at Sportmart, a sporting goods store, has to decide on the number of skis to purchase for the winter season. Based on past demand data and weather forecasts for the year, management has forecast demand to be normally distributed, with a mean of mu = 350 and a standard deviation of = 100. Each pair of skis costs c = $100 and retails for p = $250. Any unsold skis at the end of the season are disposed of for $85.

How many skis should the manager order to maximize expected profits?

The manager decided to conduct market research (at a cost) and, based on the additional information she obtained from the research, she believes that the standard deviation of demand can be reduced to 50 instead of 100. What is the impact of profitability? What happens to profitability if the standard deviation of demand increases to 150? Plot the expected profit in a chart against various values of standard deviations. What do you see?

What did you learn from this exercise?

Example 13-1 Evaluating the Optimal Service Level for Seasonal Items The manager at Sportmart, a sporting goods store, has to decide on the number of skis to purchase for the winter season. Based on past demand data and weather forecasts for the year, management has forecast demand to be normally distributed, with a mean of mu=350 and a standard deviation of =100. Each pair of skis costs c=$100 and retails for p= $250. Any unsold skis at the end of the season are disposed of for $85. How many skis should the manager order to maximize expected profits? the manager decided to conduct market research and, based on the additional information she obtained from the research, she believes that the standard deviation of demand can be reduced to 50 instead of 100 . What is the impact of profitability? What happens to profitability if the standard deviation of demand increases to 150 ? What did you learn from this exercise? Input Mean demand, mu= Standard Deviation of Demand, = Cost per unit, c= Retail price, p= Salvage Value, s = Example 13-1 Evaluating the Optimal Service Level for Seasonal Items The manager at Sportmart, a sporting goods store, has to decide on the number of skis to purchase for the winter season. Based on past demand data and weather forecasts for the year, management has forecast demand to be normally distributed, with a mean of mu=350 and a standard deviation of =100. Each pair of skis costs c=$100 and retails for p= $250. Any unsold skis at the end of the season are disposed of for $85. How many skis should the manager order to maximize expected profits? the manager decided to conduct market research and, based on the additional information she obtained from the research, she believes that the standard deviation of demand can be reduced to 50 instead of 100 . What is the impact of profitability? What happens to profitability if the standard deviation of demand increases to 150 ? What did you learn from this exercise? Input Mean demand, mu= Standard Deviation of Demand, = Cost per unit, c= Retail price, p= Salvage Value, s =