Suppose now that the UNC basketball team have just won the NCAA championship and
ID: 3040833 • Letter: S
Question
Suppose now that the UNC basketball team have just won the NCAA championship and the UNC Student Stores has a one time opportunity to order championship t-shirts to be sold over a period of a few months. Each t-shirt costs the store $10 to purchase and the store sells each for $20. Each t-shirt not sold by the end of the selling season can be salvaged at a value of $5 each. Any demand that cannot be met is simply lost, no additional charge incurs. According to the store’s market research, it is predicted that the t-shirt demand will definitely be more than 200 but it is impossible for it to exceed 500. So, it assumes that the demand will be uniformly distributed between 200 and 500. How many t-shirts should the store order? What if the store assumes that the demand has a normal distribution with mean and standard deviation the same as those of the uniform distribution used initially? What would the optimal order size be in that case?
Explanation / Answer
the pattern of demand is normally distributed within the span of 200 to 500. Thus the mean will be (200+500)/2 =350
Clearly the order should be close to dmeand of higher than it . But there is loss if order is higher than demand. Thus the order should be equal to demand mean which is equal to 350.