Chapter 6 Case Problem: Specialty Toys

The purpose of this assignment is to know how to apply normal probability distribution concepts to a real business case.

1. Read the case of specialty toys at the end of Chapter 6 in its entirety.
2. Describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.
3. Compute the probability of a stock-out for the order quantities suggested by members of management team.
4. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.
5. The order quantity should have a 70% chance of meeting demand and only a 30% chance of stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?