Question: Sourcing problem Teddy Bower sources a parka from an Asian supplier for $10 each and sells to customer for $22 each. Leftover parkas at the

Sourcing problem Teddy Bower sources a parka from

Sourcing problem Teddy Bower sources a parka from an Asian supplier for $10 each and sells to customer for $22 each. Leftover parkas at the end of the season have no value. The demand forecast is normally distributed with mean 2,100 and standard deviation 1,200. Now suppose Teddy Bower found a reliable vendor in the United States that can produce parkas very quickly but at a higher price than the Asian supplier. Hence, in addition to parkas from Asia, Teddy Bower can buy an unlimited quantity of additional parkas from this American vendor at $15 each after the demand is known. a. Suppose Teddy Bower orders 1500 parkas from Asian supplier. What is the probability that Teddy Bower will order from American supplier once the demand is known? b. Assume order of 1500 from Asian supplier. What is the expected purchase amount from the American supplier? Given the future opportunity to purchase from the American supplier at $15 per parka, what is the optimal order quantity from the Asian supplier? d. What is the expected profit for your answer in part c? C

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