Use the sales forecaster’s prediction to describe a normal probabilit Homework Help | Page 2

• Compute the projected profit for the order quantities suggested by the management team
under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which
sales are 20,000 units, and optimistic in which sales are 30,000 units.
• One of SuperFun’s managers felt the profit potential was so great 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?
Case Study – SuperFun Toys
SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management
learned the pre-holiday 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 SuperFun
discovers a new toy with good market potential, it chooses an October market entry date. To
get toys in its stores by October, SuperFun places one-time orders with its manufacturers in
June or July of each year.
Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of
shortage in the marketplace often increases the demand to high levels and large profits can
be realized. However, new toys can also flop, leaving SuperFun stuck with high levels of
inventory that must be sold at reduced prices. The most important question the company
faces is deciding how many units of a new toy should be purchased to meet anticipated
sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits
will be reduced because of low prices realized in clearance sales.
This is where SuperFun feels that you, as an MBA student, can bring value.