1. SuperFun Toys Case Study · -Use the sales forecaster's prediction 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. Hint : To find the standard deviation, think Empirical Rule covered in Week 1. · Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000). · Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units. · One of SuperFun's managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs.

What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 2. Expansion Strategy and Establishing a Re-Order Point Case 1: Bell Computer Company · Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? · Compute the variation for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?

Case 2: Kyle Bits and Bytes · What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer? Title ABC/123 Version X 1 Case Study – Week 3 Individual Assignment QNT/561 Version University of Phoenix Material Case Study – Bell Computer Company The Bell Computer Company is considering a plant expansion enabling the company to begin production of a new computer product. You have obtained your MBA from the University of Phoenix and, as a vice-president, you must determine whether to make the expansion a medium- or large- scale project. The demand for the new product involves an uncertainty, which for planning purposes may be low demand, medium demand, or high demand.

The probability estimates for the demands are 0.20, 0.50, and 0.30, respectively. Case Study – Kyle Bits and Bytes Kyle Bits and Bytes, a retailer of computing products sells a variety of computer-related products. One of Kyle’s most popular products is an HP laser printer. The average weekly demand is 200 units. Lead time (lead time is defined as the amount of time between when the order is placed and when it is delivered) for a new order from the manufacturer to arrive is one week.

If the demand for printers were constant, the retailer would re-order when there were exactly 200 printers in inventory. However, Kyle learned demand is a random variable in his Operations Management class. An analysis of previous weeks reveals the weekly demand standard deviation is 30. Kyle knows if a customer wants to buy an HP laser printer but he has none available, he will lose that sale, plus possibly additional sales. He wants the probability of running short (stock-out) in any week to be no more than 6%.

Case 1 Medium-Scale Large-Scale Expansion Profits Expansion Profits Annual Profit (00s) P(x) Annual Profit (00s) P(x) Demand Low % 0 20% Medium % % High % % Expected Profit (00s) Risk Analysis for Medium-Scale Expansion Demand Annual Profit (x) 00s Probability P(x) (x - µ) (x - µ)2 (x - µ)2 * P(x) Low % Medium % High % σ2 = σ = Risk Analysis for Large-Scale Expansion Demand Annual Profit (x) 00s Probability P(x) (x - µ) (x - µ)2 (x - µ)2 * P(x) Low 0 20% Medium % High % σ2 = σ = Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version 9 Applied Business Research and Statistics University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries.

Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Individual Assignment: Expansion Strategy and Establishing a Re-order Point Purpose of Assignment This assignment has two cases.

The first case is on expansion strategy. Managers constantly have to make decisions under uncertainty. This assignment gives students an opportunity to use the mean and standard deviation of probability distributions to make a decision on expansion strategy. The second case is on determining at which point a manager should re-order a printer so he or she doesn’t run out-of-stock. The second case uses normal distribution.

The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management. Resources Required · Microsoft Excel® · Bell Computer Company Forecasts data set · Case Study Scenarios Grading Guide Content Met Partially Met Not Met Comments: Write a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios. Case 1: Bell Computer Company · Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? Compute the variation for the profit associated with the two expansion alternatives.

Which decision is preferred for the objective of minimizing the risk or uncertainty? Case 2: Kyle Bits and Bytes · What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer? 3 #/3 Writing Guidelines Met Partially Met Not Met Comments: The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page.

Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Total Available Total Earned 2 #/2 Assignment Total # 5 #/5 Additional comments: Profit Projections Order Quantity 15,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 18,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 20,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 24,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 28,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Question 4 Order Quantity Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ .00 @ .00 Pessimistic 10,000 Likely 20,000 Optimistic 30,000 SuperFun Toys Case Study Grading Guide QNT/561 Version SuperFun Toys Case Study Grading Guide QNT/561 Version 9 Applied Business Research and Statistics University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries.

Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Learning Team Assignment: SuperFun Toys Case Study Purpose of Assignment The purpose of this assignment is for students to learn how to make managerial decision using a case study on Normal Distribution.

This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product Resources Required · Microsoft Excel® · SuperFun Toys Case Study · SuperFun Toys Case Study data set Grading Guide Content Met Partially Met Not Met Comments: Review the SuperFun Toys Case Study and Data Set. Develop a 1,050-word case study analysis including the following: · Use the sales forecaster’s prediction 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.

Hint : To find the standard deviation, think Empirical Rule covered in Week 1. · Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000). · Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units. · One of SuperFun’s managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

Total Available Total Earned 7 #/7 Writing Guidelines Met Partially Met Not Met Comments: The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page. Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation.

Total Available Total Earned 3 #/3 Assignment Total # 10 #/10 Additional comments: Title ABC/123 Version X 1 Case Study – SuperFun Toys QNT/561 Version University of Phoenix Material Case Study – SuperFun Toys SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management learned the pre-holiday season is the best time to introduce a new toy because many families use this time to look for new ideas for December holiday gifts. When SuperFun discovers a new toy with good market potential, it chooses an October market entry date. To get toys in its stores by October, SuperFun places one-time orders with its manufacturers in June or July of each year. Demand for children’s toys can be highly volatile.

If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving SuperFun stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is 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. This is where SuperFun feels that you, as an MBA student, can bring value.

For the coming season, SuperFun plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses predicting the weather conditions. The responses range from “It looks to be a very nice day!

Have fun†to “I think it may rain today. Don’t forget your umbrella.†Tests with the product show even though it is not a perfect weather predictor, its predictions are surprisingly good. Several of SuperFun’s managers claimed Teddy gave predictions of the weather that were as good as many local television weather forecasters. As with other products, SuperFun faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units.

The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. Having a sound background in statistics and business, you are required to perform statistical analysis and the profit projections which is typically done by the product management group. You want to provide management with an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation. SuperFun expects to sell Weather Teddy for based on a cost of per unit. If inventory remains after the holiday season, SuperFun will sell all surplus inventories for per unit. After reviewing the sales history of similar products, SuperFun’s senior sales forecaster predicted an expected demand of 20,000 units with a 95% probability that demand would be between 10,000 units and 30,000 units.

Paper for above instructions

Analysis of SuperFun Toys Case Study

Introduction

In the competitive domain of toy manufacturing and retail, optimizing inventory is crucial for profitability. The current case study revolves around SuperFun Toys, which encounters uncertainties in demand forecasting for their innovative product, Weather Teddy. This analysis employs statistical methods to understand demand distribution, stock-out risks, and profitability projections based on various order quantities. It also evaluates a strategy to ensure a defined probability of fulfilling demand while minimizing stock-outs.

Normal Probability Distribution

The sales forecaster predicts a demand of 20,000 units for Weather Teddy, with a 95% confidence interval ranging from 10,000 to 30,000 units. This scenario suggests a normal distribution can be employed, wherein:
- Mean (µ) = 20,000 units
- Standard Deviation (σ) = (30,000 - 20,000) / 2 = 5,000 units (using the empirical rule for a normal distribution)
This standard deviation implies that approximately 68% of orders would fall between 15,000 (20,000 - 5,000) and 25,000 (20,000 + 5,000) units.
Sketching the Distribution:
A rough sketch of this normal distribution would show the number of units on the x-axis and the probability density function on the y-axis, centered around the mean of 20,000 units, tapering off towards both ends. The values of σ can be marked at intervals of 5,000, highlighting the spread of demand.

Probability of Stock-Out

To compute the probability of stock-outs for various order quantities (15,000; 18,000; 24,000; and 28,000 units), we employ the z-score formula:
\[
z = \frac{X - µ}{σ}
\]
Where \( X \) is the order quantity.
1. Order Quantity = 15,000
\[
z = \frac{15,000 - 20,000}{5,000} = -1.0 \implies P(Z < -1.0) = 0.1587
\]
Stock-out probability = 15.87%
2. Order Quantity = 18,000
\[
z = \frac{18,000 - 20,000}{5,000} = -0.4 \implies P(Z < -0.4) = 0.3446
\]
Stock-out probability = 34.46%
3. Order Quantity = 24,000
\[
z = \frac{24,000 - 20,000}{5,000} = 0.8 \implies P(Z < 0.8) = 0.7881
\]
Stock-out probability = 78.81%
4. Order Quantity = 28,000
\[
z = \frac{28,000 - 20,000}{5,000} = 1.6 \implies P(Z < 1.6) = 0.9452
\]
Stock-out probability = 94.52%
Based on the calculations, ordering less than the mean is associated with a higher stock-out probability, whereas surpassing the mean excessively leads to increased inventory holding costs.

Projected Profit Analysis

Profit projections for different scenarios of order quantities can be computed as follows:
- Profit = Total Revenue - Total Cost
- Total Revenue = Selling Price * Units Sold
- Total Cost = Purchase Cost * Order Quantity
##### Formula Application
Basic Premises
- Selling price =
- Purchase cost =
Order Quantity: 15,000
- Pessimistic Sales (10,000) → Profit = (10,000 24) - (15,000 16) = 0,000 - 0,000 =

1superfun Toys Case Study Use The Sales Forecasters Prediction To

1. SuperFun Toys Case Study · -Use the sales forecaster's prediction 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. Hint : To find the standard deviation, think Empirical Rule covered in Week 1. · Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000). · Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units. · One of SuperFun's managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs.

What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 2. Expansion Strategy and Establishing a Re-Order Point Case 1: Bell Computer Company · Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? · Compute the variation for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?

Case 2: Kyle Bits and Bytes · What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer? Title ABC/123 Version X 1 Case Study – Week 3 Individual Assignment QNT/561 Version University of Phoenix Material Case Study – Bell Computer Company The Bell Computer Company is considering a plant expansion enabling the company to begin production of a new computer product. You have obtained your MBA from the University of Phoenix and, as a vice-president, you must determine whether to make the expansion a medium- or large- scale project. The demand for the new product involves an uncertainty, which for planning purposes may be low demand, medium demand, or high demand.

The probability estimates for the demands are 0.20, 0.50, and 0.30, respectively. Case Study – Kyle Bits and Bytes Kyle Bits and Bytes, a retailer of computing products sells a variety of computer-related products. One of Kyle’s most popular products is an HP laser printer. The average weekly demand is 200 units. Lead time (lead time is defined as the amount of time between when the order is placed and when it is delivered) for a new order from the manufacturer to arrive is one week.

If the demand for printers were constant, the retailer would re-order when there were exactly 200 printers in inventory. However, Kyle learned demand is a random variable in his Operations Management class. An analysis of previous weeks reveals the weekly demand standard deviation is 30. Kyle knows if a customer wants to buy an HP laser printer but he has none available, he will lose that sale, plus possibly additional sales. He wants the probability of running short (stock-out) in any week to be no more than 6%.

Case 1 Medium-Scale Large-Scale Expansion Profits Expansion Profits Annual Profit ($1000s) P(x) Annual Profit ($1000s) P(x) Demand Low % 0 20% Medium % % High % % Expected Profit ($1000s) Risk Analysis for Medium-Scale Expansion Demand Annual Profit (x) $1000s Probability P(x) (x - µ) (x - µ)2 (x - µ)2 * P(x) Low % Medium % High % σ2 = σ = Risk Analysis for Large-Scale Expansion Demand Annual Profit (x) $1000s Probability P(x) (x - µ) (x - µ)2 (x - µ)2 * P(x) Low 0 20% Medium % High % σ2 = σ = Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version 9 Applied Business Research and Statistics University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries.

Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Individual Assignment: Expansion Strategy and Establishing a Re-order Point Purpose of Assignment This assignment has two cases.

The first case is on expansion strategy. Managers constantly have to make decisions under uncertainty. This assignment gives students an opportunity to use the mean and standard deviation of probability distributions to make a decision on expansion strategy. The second case is on determining at which point a manager should re-order a printer so he or she doesn’t run out-of-stock. The second case uses normal distribution.

The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management. Resources Required · Microsoft Excel® · Bell Computer Company Forecasts data set · Case Study Scenarios Grading Guide Content Met Partially Met Not Met Comments: Write a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios. Case 1: Bell Computer Company · Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? Compute the variation for the profit associated with the two expansion alternatives.

Which decision is preferred for the objective of minimizing the risk or uncertainty? Case 2: Kyle Bits and Bytes · What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer? 3 #/3 Writing Guidelines Met Partially Met Not Met Comments: The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page.

Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Total Available Total Earned 2 #/2 Assignment Total # 5 #/5 Additional comments: Profit Projections Order Quantity 15,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 18,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 20,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 24,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Order Quantity 28,000 Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,,000 Likely 20,,000 Optimistic 30,,000 Question 4 Order Quantity Purchase Cost per unit $ 16.00 Sales Order Quantity Total Cost Total Revenue Profit @ $24.00 @ $5.00 Pessimistic 10,000 Likely 20,000 Optimistic 30,000 SuperFun Toys Case Study Grading Guide QNT/561 Version SuperFun Toys Case Study Grading Guide QNT/561 Version 9 Applied Business Research and Statistics University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries.

Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Learning Team Assignment: SuperFun Toys Case Study Purpose of Assignment The purpose of this assignment is for students to learn how to make managerial decision using a case study on Normal Distribution.

This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product Resources Required · Microsoft Excel® · SuperFun Toys Case Study · SuperFun Toys Case Study data set Grading Guide Content Met Partially Met Not Met Comments: Review the SuperFun Toys Case Study and Data Set. Develop a 1,050-word case study analysis including the following: · Use the sales forecaster’s prediction 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.

Hint : To find the standard deviation, think Empirical Rule covered in Week 1. · Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000). · Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units. · One of SuperFun’s managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

Total Available Total Earned 7 #/7 Writing Guidelines Met Partially Met Not Met Comments: The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page. Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation.

Total Available Total Earned 3 #/3 Assignment Total # 10 #/10 Additional comments: Title ABC/123 Version X 1 Case Study – SuperFun Toys QNT/561 Version University of Phoenix Material Case Study – SuperFun Toys SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management learned the pre-holiday season is the best time to introduce a new toy because many families use this time to look for new ideas for December holiday gifts. When SuperFun discovers a new toy with good market potential, it chooses an October market entry date. To get toys in its stores by October, SuperFun places one-time orders with its manufacturers in June or July of each year. Demand for children’s toys can be highly volatile.

If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving SuperFun stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is 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. This is where SuperFun feels that you, as an MBA student, can bring value.

For the coming season, SuperFun plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses predicting the weather conditions. The responses range from “It looks to be a very nice day!

Have fun†to “I think it may rain today. Don’t forget your umbrella.†Tests with the product show even though it is not a perfect weather predictor, its predictions are surprisingly good. Several of SuperFun’s managers claimed Teddy gave predictions of the weather that were as good as many local television weather forecasters. As with other products, SuperFun faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units.

The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. Having a sound background in statistics and business, you are required to perform statistical analysis and the profit projections which is typically done by the product management group. You want to provide management with an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation. SuperFun expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, SuperFun will sell all surplus inventories for $5 per unit. After reviewing the sales history of similar products, SuperFun’s senior sales forecaster predicted an expected demand of 20,000 units with a 95% probability that demand would be between 10,000 units and 30,000 units.