Question: P 2 ( 4 0 points ) : Nike has signed a quantity flexibility contract with a retailer for a seasonal product. If the retailer
P points: Nike has signed a quantity flexibility contract with a retailer for a seasonal product. If the retailer orders O units, Nike is willing to provide up to an additional percent if necessary. Nike's production cost is $ and it charges the retailer a wholesale price of $ The retailer sets the price for customers at $ per unit. Any unsold units can be sold by the retail at a salvage value of $ Nike can only recover $ per unit for its leftover inventory. The retailer forecasts demand to be normally distributed with a mean of and a standard deviation
a How many units O should the retailer order?
b What is the expected quantity purchased by the retailer considering the retailer can increase the order by up to after observing demand
c What is the expected quantity sold by the retailer?
d What is the retailer's expected excess inventory?
e What is the retailer's expected profit?
f What is Nike's expected profit?
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
