# A large toy company Muttel currently allows toy retailers to place orders with delivery in

Question: A large toy company Muttel currently allows toy retailers to place orders with delivery in 2 weeks. The gigantic Pocket Monster (Gipokmon) is a new toy that Muttel has introduced. Muttel charges a wholesale price of \$10 for the Gipokmon. The manager of a small boutique toy retail company TOYS-are-MINE, plans to sell the toy for \$20 and incurs a holding costA large toy company Muttel currently allows toy retailers to place orders with delivery in 2 weeks. The gigantic Pocket Monster (Gipokmon) is a new toy that Muttel has introduced. Muttel charges a wholesale price of \$10 for the Gipokmon. The manager of a small boutique toy retail company TOYS-are-MINE, plans to sell the toy for \$20 and incurs a holding cost of \$0.1 per toy per week. At this price, demand per week for the toy at one of their stores is estimated to be Poisson distributed with a mean of 1.5 units. Assume that the backorder cost is equal to the product’s retail margin. Assume TOYS-are MINE uses the order-up-to model to plan orders and deliveries to this store.

c. Given their cost and price for the Gipokmon, what is the optimal in-stock probability (service level) that TOYS-are-MINE should target? (Answer as a percentage to 1 decimal place i.e. XX.x%)
1) Inventory position = On hand quantity On order quantity = 2 5 = 7 Order quantity = Order upto level – Inventory = 20 – 7 = 13 2) Expected On-order quantit…View the full answer