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...

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...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...

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In this case we get an entire scenario about how the Japan deflation set in, what were the effects of the deflation on the economy as well as on the people of Japan. It also mentions about the various reasons because of which Japan was in such a tight grip of Deflation, Depression, Demographics and Debts Guides us through the steps taken by the government in order to curb this deflation. Imparts a great knowledge to us about the various economic terms like...

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CASESTUDY NO.1
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Many senior employees resent her that she so young to fill the position and what made them more upsets was the fact tax managers...

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This casestudy discusses the start-up, origins and strategic options facing an innovative set up
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...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...

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