977 Words Nov 18th, 2015 4 Pages
Managerial Report on Application of Business Statistics Presented by P.JASEEM BHAVYA SHAH KARTIK CHOUBEY MOHINI P.BHASKAR

CASE STUDY
SPECIALITY TOYS
Specialty Toys- Specialty Toys, Inc. sells a variety of new and innovative children’s toys. Management learned that the preholiday 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 Specialty discovers a new toy with good market potential,
Several of Specialty’s managers claimed Teddy gave predictions of the weather that were as good as many local television weather forecasters. As with other products, Specialty faces the decision of how many Weather Teddy units to order for the upcoming 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 indicates considerable disagreement concerning the market potential. The product management team asks you for 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. Specialty expects to sell Weather Teddy for \$24 based on a cost of \$16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventories for \$5 per unit. After reviewing the sales history of similar products, Specialty’s senior 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.

PROBLEMS 1. 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.
2. Compute the probability of a stock-out for the order quantities suggested by members of the management

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