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    Case Study Stat

    Uploaded by

    Praval Sai
    The document summarizes a proposal from Specialty Toys to introduce a new toy called Weather Teddy for the upcoming holiday season. It discusses forecasting the demand for the toy using a normal distribution with a mean of 20,000 units and calculates the probability of stocking out for different order quantities. It also calculates the projected profit under different sales scenarios for the order quantities suggested by management. Finally, it determines the optimal order quantity to meet a 70% chance of demand and calculates the projected profit under various sales levels for this quantity.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Case Study Stat

    Uploaded by

    Praval Sai
    248 views10 pages
    The document summarizes a proposal from Specialty Toys to introduce a new toy called Weather Teddy for the upcoming holiday season. It discusses forecasting the demand for the toy using a normal distribution with a mean of 20,000 units and calculates the probability of stocking out for different order quantities. It also calculates the projected profit under different sales scenarios for the order quantities suggested by management. Finally, it determines the optimal order quantity to meet a 70% chance of demand and calculates the projected profit under various sales levels for this quantity.

    Original Description:

    SPECIALITY TOYS

    Original Title

    Case Study Stat(1)

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    The document summarizes a proposal from Specialty Toys to introduce a new toy called Weather Teddy for the upcoming holiday season. It discusses forecasting the demand for the toy using a normal distribution with a mean of 20,000 units and calculates the probability of stocking out for different order quantities. It also calculates the projected profit under different sales scenarios for the order quantities suggested by management. Finally, it determines the optimal order quantity to meet a 70% chance of demand and calculates the projected profit under various sales levels for this quantity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    248 views10 pages

    Case Study Stat

    Uploaded by

    Praval Sai
    The document summarizes a proposal from Specialty Toys to introduce a new toy called Weather Teddy for the upcoming holiday season. It discusses forecasting the demand for the toy using a normal distribution with a mean of 20,000 units and calculates the probability of stocking out for different order quantities. It also calculates the projected profit under different sales scenarios for the order quantities suggested by management. Finally, it determines the optimal order quantity to meet a 70% chance of demand and calculates the projected profit under various sales levels for this quantity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10
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    Specialty Toys plans to introduce the Weather Teddy, a toy bear that predicts the weather when its hand is pressed by selecting from five recorded responses. Tests show its predictions are surprisingly accurate.

    Management recommended ordering quantities of 15,000, 18,000, 24,000, and 28,000 units. The sale price is $24 per unit and the cost per unit is $16.

    The order quantities recommended by management were 15,000, 18,000, 24,000, and 28,000 units. The sale price is $24 per unit and the cost per unit is $16. Surplus inventory can be sold for $5 per unit.

    By Group-2

    Specialty Toys- Specialty Toys, Inc. sells a variety of new and


    innovative childrens toys.
    Management learned that the preholiday season is the best time
    to introduce a new toy, because for December holiday gifts. .
    Specialty plans to introduce a new product called Weather
    Teddy.
    When a child presses Teddys hand, the bear begins to talk. A
    built-in barometer selects one of five responses that predict the
    weather conditions. The responses range from
    It looks to be a very nice day! Have fun
    I think it may rain today. Dont forget your umbrella.
    Tests with the product show that, even though it is not a perfect
    weather predictor, its predictions are surprisingly good
    Recommended to order quantities= 15000 , 18000 , 24000,
    28000
    Sale price = $24/unit
    Cost = $16/unit
    surplus inventories price= $5/unit.
    Specialtys 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.
    1. Use the sales forecasters 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.

    Let X be the demand for the toy.


    Then X follows normal distribution with mean
    =20000
    standard deviation = = 5102.040816 .
    Then P(10000 < X < 30000) = 0.95
    (0.025 =Down area of curve)
    From tables of areas under the standard normal curve
    z=(30000-20000)/ = 1.96
    = (30000-20000)/1.96 =10000/1.96 = 5102.040816
    1) The demand distribution can be approximated by a normal distribution with mean = 20000
    and standard deviation = 5102.

    demand
    0.00009

    0.00008

    0.00007

    0.00006

    0.00005
    demand
    0.00004

    0.00003

    0.00002

    0.00001

    0
    0 10000 20000 30000 40000 50000 60000
    2. Compute the probability of a stock-out for the
    order quantities suggested by members of the
    management team

    Order (K) (K-20000)/5102 P(T > X)

    15000
    -0.98001 0.836458876
    18000
    -0.392 0.652472052
    24000
    0.784006 0.216518215
    28000
    1.568013 0.058439102
    3. Compute the projected profit for the order quantities
    suggested by the management team under three scenarios:
    worst case in which sales = 10000 units, most likely case in
    which sales=20000 units and best case in which sales=30000
    units
    The projected profit for the different order quantities and scenarios
    are given in the following table.
    Order Scenario 10000 Scenario 20000 Scenario 30000

    15000 8*10000-11*5000 =25000 8*15000=120000 8*15000 = 120000

    18000 8*10000-11*8000 8*18000 = 144000 8*18000 = 144000


    = -8000

    24000 8*10000-11*14000 8*20000-11*4000 8*24000 = 192000


    = -74000 =116000

    28000 8*10000-11*18000 8*2000-11*8000 8*28000 = 224000


    = -118000 =72000
    4. one of specialty's managers felt that the profit potential was so
    great that the order quantity should have a 70% chance of meeting
    demand and only a 30%chance of any stock-outs. what quantity
    would be ordered under this policy and what is the projected profit
    under the three sales scenarios?

    The order quantity to meet 70% demand is found by


    solving
    Z= P(X < K) =0.70
    P(Z < (K-20000)/5102 ) = 0.70
    (K-20000)/5102 = 0.5244
    K = 20000 + 5102 * 0.5244 = 20000 + 2675 = 22675.5
    Cost =16
    Price = 24
    Surplus =5
    expected sales surplus cost profit

    worst 10000 240000 63377.5 362808 -59430.5

    most
    likely 20000 480000 13377.5 362808 130569.5

    best 30000 720000 0 362808 357192


    Thank You

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