The purpose of this assignment is for students to learn how to make m Homework Help | Page 3

For the coming season, SuperFun plans to introduce a new product called Weather Teddy.
This variation of a talking teddy bear is made by a company in Taiwan. When a child presses
Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses
predicting the weather conditions. The responses range from “It looks to be a very nice day!
Have fun” to “I think it may rain today. Don’t forget your umbrella.” Tests with the product
show even though it is not a perfect weather predictor, its predictions are surprisingly good.
Several of SuperFun’s managers claimed Teddy gave predictions of the weather that were
as good as many local television weather forecasters.
As with other products, SuperFun faces the decision of how many Weather Teddy units to
order for the coming holiday season. Members of the management team suggested order
qua ntities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantities
suggested indicates considerable disagreement concerning the market potential.
Having a sound background in statistics and business, you are required to perform statistical
analysis and the profit projections which is typically done by the product management group.
You want to provide management with 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.
SuperFun expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory
remains after the holiday season, SuperFun will sell all surplus inventories for $5 per unit.
After reviewing the sales history of similar products, SuperFun’s senior sales 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.