1. Use the sales forecaster’s predication to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.

Let's assume that the expected sales distribution is normally distributed, with a mean of 20,000, and 95% falling within 10,000 and 20,000.

We know that +/- 1.96 standard deviations from the mean will contain 95% of the values. So, we can get the standard deviation by:

z = (x - mu)/sigma = 1.96
sigma = (x - mu)/z

Sigma = (30,000-20,000) / 1.96 = 5,102 units.

So, we have a distribution with a mean of 20,000 and a standard deviation of 5,102.

2. Compute the probability of a stock-out for the order quantities suggested by members of the management team.

Using the normal distribution theory, we discover that as the ordered quantity increases the probability of stockout decreases.

At 15,000 the probability of stockout will be 0.8365
At 18,000 the probability of stockout will be 0.6517
At 24,000 the probability of stockout will be 0.2177
At 28,000 the probability of stockout will be 0.0582

3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units and best case in which sales = 30,000 units:

Order Quantity: 15,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit |
|10,000 |25,000 |
|20,000 |120,000 |
|30,000 |120,000 |

Order Quantity: 18,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit |
|10,000 |-8,000 |
|20,000 |144,000 |
|30,000...

...Solution to Case Problem SpecialtyToys
10/24/2012
I. Introduction:
The SpecialtyToys Company faces a challenge of deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. Here, I will help to analyze an appropriate order...

...be the demand for the toy. Then X follows normal distribution with mean μ = 20000 and standard deviation σ. Then
P(10000 < X < 30000) = 0.95
P( X < 20000)=0.5
P(10000 < X < 20000) = 0.475
P( X < 10000)=0.025
NORM.S.INV(0.025)=-1.96
NORM.S.INV(0.975)=1.96
Z-score of 10000 =-1.96
Z-score of 30000=1.96
σ = (30000-20000)/1.96 =10000/1.96 = 5102
Standard Deviation of 5102
The graph above shows the distribution for the demand for the Weather Teddy Bear using...

... Case 13: Southeastern Specialty, Inc.
Financial Risk (1, 2, 3, 4, & 6)
1. Is the return on the one-year T-bill risk free?
No, the return on the one-year T-bill is not risk free. Financial risk is related to the probability of earning a return less than expected and the larger the chance of earning a return far below that expected, the greater the amount of financial risk. Risk free assumes 100% probability that the investment will earn the total percent of...

...cost of financing by discounting the cash flows by the weighted average cost of capital which leads to good decisions. In the case of Dinky Company the NPV was $304,976.61 so the project should be accepted.
The internal rate of return is an alternative to the NPV method. This method is internal to the project, and only relies on the cash flows of the project. In our case we would compare the IRR of to our WACC of 13.3%. Our IRR is significantly higher...

...G.G.
Toys
–
Nele
Rieve
–
E01487695
–
10/14/2014
G.G.
Toys
is
a
leading
manufacturer
of
high-‐quality
dolls
located
in
the
US.
The
company
is
popular
for
its
“Geoffrey
dolls”
but,
due
to
rising
product
costs,
has
included
customized
dolls
and
cradles
in
its
product
mix.
Two
plants...

...1. Grand and Toys strategy is to achieve sales of one billion Canadian dollars, maintain a strong brand to be the clear leader in the Canadian commercial segment and to operate about 85 commercially focused stores clustered in major markets. Grand & Toy also wants to achieve their marketing objectives by offering 8000 products through 90 locations and web ordering system. Performance objectives against the strategic plan to achieve its vision included:
• Growing...

...Introduction
Based on the given information, there are many problems revolving around Educational Toy Company (ETC) which concerns the human resource management (HRM) issues. The immediate problem is the dropped of sales figure recently resulting from the lack of innovation and creativity in their product design. This problem did not appear from nowhere; rather, it is the effect from poor management in particular the HRM area within the company. As mentioned, there is no one in...

...BIGLOW TOY COMPANY
In late August 1997, Jean Biglow, treasurer of Biglow Toy Company, was concerned with
financing its sales operations during the upcoming Christmas selling season. To cope with the
Christmas sales peak, Jean planned to build up Biglow’s toy inventory throughout the fall. This
would generate substantial cash deficits in October, November, and December. Some means of
short-term financing had to be found to cover these deficits. On...

## Share this Document

Let your classmates know about this document and more at StudyMode.com