Chapter 12

Q 12.7 (the end of season price is 50% of the regular price, which is 50%×$54 = $27)
For part (a), in addition to calculating the (profit-maximizing) order quantity, please also calculate the
cost of mismatch.
For part (b), in addition to calculating the expected profit, please also calculate the expected lost sales,
expected sales, expected leftover inventory, and in-stock and stockout probabilities.
For part (c), DO NOT answer the original question; instead, please identify the order quantity if Teddy
Bower wants to achieve service level of 80% (or in-stock probability).

Q 12.8
Answer part (b) only (assuming Land’s End will choose option 2 and any unsold items at the end of the
season are worth 0). What is the profit-maximizing order quantity? What is the associated expected lost
sales, sales, and leftover inventory? What is the expected profit and the cost of mismatch?

Chapter 14
Q 14.6
Answer parts (a) and (b) only.
For part (b), please also calculate the associated expected back-order, on-hand inventory, on-order
inventory and average inventory.

Q 14.8
Answer parts (a) and (b) only
Note:
(1) base stock level = order-up-to level;
(2) this is a special case, the demand is not independent across time periods, thus do not use the
formula presented in the PPT slides to convert one-day demand into multi-day demand. The
demand distribution in multi-day is given in the problem.
For part (a), hint: here the holding and back-order costs are in dollars, unlike the example covered in class
(percentage). But it makes no difference.
For part (b), please also calculate the in-stock/stockout probabilities, expected back-order, on-hand
inventory and average inventory.