Business, 19.03.2021 18:30 ineedhelp2285

Flextrola, Inc., an electronics systems integrator, is planning to design a key component for its next-generation product with Solectrics. Flextrola will integrate the component with some software and then sell it to consumers. Given the short life cycles of such products and the long lead times quoted by Solectrics, Flextrola only has one opportunity to place an order with Solectrics prior to the beginning of its selling season. Flextrolaâ€™s demand during the season is normally distributed with a mean of 900 and a standard deviation of 700. Solectricsâ€™ production cost for the component is $52 per unit, and it plans to sell the component for $70 per unit to Flextrola. Flextrola incurs essentially no cost associated with the software integration and handling of each unit. Flextrola sells these units to consumers for $124 each. Flextrola can sell unsold inventory at the end of the season in a secondary electronics market for $46 each. The existing contract specifies that once Flextrola places the order, no changes are allowed to it. Also, Solectrics does not accept any returns of unsold inventory, so Flextrola must dispose of excess inventory in the secondary market.

Required:
a. What is the probability that Flextrolaâ€™s demand will be within 25% of its forecast?
b. What is the probability that Flextrolaâ€™s demand will be more than 40% greater than Flextrolaâ€™s forecast?
c. Under this contract, how many units should Flextrola order to maximize its expected profit?

Answers: 1

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Flextrola, Inc., an electronics systems integrator, is planning to design a key component for its ne...

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