Example 2:Evaluating the Optimal Service Level for Seasonal Items The manager at Sportmart,a sporting goods store,has to decide on the number of skis to purchase for the winter season. Based on past demand data and weather forecasts for the year, management has forecast demand to be normally distributed, with a mean of m 350 and a standard deviation of o=100. Each pair of skis costs c=$100 and retails for p=$250. Any unsold skis at the end of the season are disposed of for $85. Assume that it costs $5 to hold a pair of skis in inventory for the season. How many skis should the manager order to maximize expected profits? SEIEE AU406 16
+ - SEIEE AU406 Example 2: Evaluating the Optimal Service Level for Seasonal Items The manager at Sportmart, a sporting goods store, has to decide on the number of skis to purchase for the winter season. Based on past demand data and weather forecasts for the year, management has forecast demand to be normally distributed, with a mean of m = 350 and a standard deviation of σ=100. Each pair of skis costs c =$100 and retails for p= $250. Any unsold skis at the end of the season are disposed of for $85. Assume that it costs $5 to hold a pair of skis in inventory for the season. How many skis should the manager order to maximize expected profits? 16
Example 3:Evaluating the Optimal Service Level for Seasonal Items If the order quatity is 450 pair,evaluate the expected overstock and understock. Epcdedove=O-ws(O。A）+oiP。） Expcted dk=u-o1-RO。】+rP,） SEIEE AU406 17
+ - SEIEE AU406 17 If the order quatity is 450 pair, evaluate the expected overstock and understock. Example 3: Evaluating the Optimal Service Level for Seasonal Items