12.38 University of Florida football programs are printed 1 week prior to each h

Question

12.38 University of Florida football programs are printed 1 week prior to each home game. Attendance averages 90,000 scream- W ing and loyal Gators fans, of whom two-thirds usually buy the program, following a normal distribution, for $4 each. Unsold pro- e grams are sent to a recycling center that pays only 10 cents per pro- gram. The standard deviation is 5,000 programs, and the cost to print each program is $1. a) What is the cost of underestimating demand for each program? b) What is the overage cost per program? c) How many programs should be ordered per game? d) What is the stockout risk for this order size?

Explanation / Answer

12.38 University of Florida football programs are printed 1 week prior to each home game. Attendance averages 90,000 scream- W ing and loyal Gators fans, of whom two-thirds usually buy the program, following a normal distribution, for $4 each. Unsold pro- e grams are sent to a recycling center that pays only 10 cents per pro- gram. The standard deviation is 5,000 programs, and the cost to print each program is $1. a) What is the cost of underestimating demand for each program? b) What is the overage cost per program? c) How many programs should be ordered per game? d) What is the stockout risk for this order size?

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