Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. The anticipated demand...

Green Thumb, a manufacturer of lawn care equipment, has introduced a new product. The anticipated demand is normally distributed with a mean of m = 100 and a standard deviation of s = 40. Each unit costs $150 to manufacture and the introductory price is to be $200 to achieve this level of sales. Any unsold units at the end of the season are unlikely to be very valuable and will be disposed off in a fire sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the expected profit from this policy? On average, how many customers does Green Thumb expect to turn away because of stocking out? Input the data from the problem into the Input section of the spreadsheet and respond to the three questions posed in the problem. Expand upon the solution by considering the following: Green Thumb has investigated ways to improve its profitability. Option 1: they have found an outlet that will pay them $60 per unit for overstocks. Option 2: they are exploring raising the price from $200 to $230 per unit. However, the mean demand is expected to drop from 100 to 70. Option 3 involves a retrofit to their manufacture process that would reduce unit cost from $150 to $130. However, the cost of the retrofit adds back $10 to each unit. By manipulating the input data, determine the Cu, Co, CSL, EO, EU and profit for each option individually and in any combination. Which would you choose and why? SHOW A SUMMARY TABLE OF YOUR STUDY IN THE EXCEL SPREADSHEET.

Expert Solution

We will need critical fractile method or the newsvendor model to solve this. The setup on excel is shown below

Take the information and substitute for the first option and we get expected profit of 2818.4

Now use the second set of information (option 1: $60/unit for overstock) The expected profit becomes 2910.73

The next options 2: price increase from 200 to 230 and mean drop from 100 to 70. Profit becomes 2755.5

Option 3: cost of the unit becomes 130 + 10 = 140 per unit. It gives a profit of 3681.94

Overall, the option 3 is the best option since it has the highest expected profit.

keosha answered 1 year ago

Green Forever, a manufacturer of lawn equipment, has preliminary drawings for two grass trimmer designs. Charla...

Green Forever, a manufacturer of lawn equipment, has preliminary drawings for two grass trimmer designs. Charla Fraley's job is to determine which is better environmentally. Specifically, she is to use the following data to help the company determine the following items. LOADING... GF Deluxe PART RESALE REVENUE PER UNIT RECYCLING REVENUE PER UNIT PROCESSING COST PER UNIT DISPOSAL COST PER UNIT Metal drive $3.13 $4.66 $1.16 $0.91 Battery 0.00 3.76 6.29 3.08 Motor housing 3.98 2.86 2.02 1.39 Trimmer head...

Green Gro is an innovative new pH-balanced lawn fertilizer that will be sold by the manufacturer...

Green Gro is an innovative new pH-balanced lawn fertilizer that will be sold by the manufacturer directly to homeowners. In the area where Green Gro has been developed, the fertilizers currently being sold are spread on a lawn only after a layer of lime has been applied. Green Gro has the advantage of not requiring an application of lime. The manufacturer’s variable costs for producing Green Gro are $11.00 per 50-pound sack. A 50-pound sack of Green Gro covers approximately...

The new Fresh-Cola product by Fresh-Cola Inc., a manufacturer of carbonated drinks, has just been introduced....

The new Fresh-Cola product by Fresh-Cola Inc., a manufacturer of carbonated drinks, has just been introduced. What patterns develop during this phase of the product life cycle?

Paula Green owns and operates the Green Thumb Nursery as a sole proprietorship. The business has...

Paula Green owns and operates the Green Thumb Nursery as a sole proprietorship. The business has total assets with a $260,000 adjusted basis and a $500,000 FMV. Paula wants to expand into the landscaping business. She views this expansion as risky and therefore wants to incorporate so as not to put her personal assets at risk. Her friend, Mary Brown, is willing to invest $250,000 in the enterprise. Although Green Thumb has earned approximately $55,000 per year, Paula and Mary...

(LO 2, 3) The Blue Thumb Lawn Care Company began operations on April 1. At April...

(LO 2, 3) The Blue Thumb Lawn Care Company began operations on April 1. At April 30, the trial balance shows the following balances for selected accounts. Prepaid Insurance 3,600 Equipment 28,000 Notes Payable 20,000 Unearned Service Revenue 4,200 Service Revenue 1,800 Analysis reveals the following additional data. 1.Prepaid insurance is the cost of a 2-year insurance policy, effective April 1. 2.Depreciation on the equipment is $500 per month. 3.The note payable is dated April 1. It is for 1-year...

Green Lawn Industries has three product lines of sprinklers that it manufactures: Oscillating, Rotary, and Traveling....

Green Lawn Industries has three product lines of sprinklers that it manufactures: Oscillating, Rotary, and Traveling. The following is an income statement for each of the three product lines for the year ended December 31, 2019: Oscillating Rotary Traveling Total Sales $375,000 $232,500 $300,000 $907,500 Cost of Goods Sold (123,000) (182,500) (127,500) (433,000) Sales Commission (33,000) (32,500) (30,000) (95,500) Contribution Margin 219,000 17,500 142,500 379,000 Advertising expense (specific to each individual segment) (27,000) (7,500) 0 (34,500) General Fixed Operations Expense...

Green Lawn Care is analyzing the replacement of an aging compactor motor. The key parameters of...

Green Lawn Care is analyzing the replacement of an aging compactor motor. The key parameters of the three motors under scrutiny (Small, Medium and Big) are provided below. Parameters Small Medium Big 1. Initial Cost ($) 300,000 425,000 510,000 2. Revenues ($) 200,000 annually 200,000 at EOY1 increasing by 1% annually thereafter 290,000 at EOY1 decreasing by 1% annually thereafter 3. Operating Costs ($) 100,000 at EOY1 decreasing by $2,000 annually thereafter. 110,000 at EOY1 increasing by $500 annually thereafter....

Look at the following demand and supply schedules for the new Pepsi product just being introduced....

Look at the following demand and supply schedules for the new Pepsi product just being introduced. We will assume that the units are case lots bought by an individual family within the first six months of introduction. price quantity demanded quantity supplied 10 10 50 8 20 40 6 30 30 4 40 20 2 50 10 1. If the price of Crystal Pepsi were $2.00 per case, how many cases would be offered for sale? 2. If the...

1. Green desires to form a new company to manufacture lawn mowers. Green is concerned about...

1. Green desires to form a new company to manufacture lawn mowers. Green is concerned about having his personal assets exposed to liability for the new company’s contracts and torts. Furthermore, he wants to retain control over the company’s operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which...

Company G is America's largest manufacturer of both commercial and residential lawn mowing equipment. Company has...

Company G is America's largest manufacturer of both commercial and residential lawn mowing equipment. Company has relied on comanpy B and company C (2 diffenrent vendors) to supply engines for the mowers. Company A views B & C as qualified and would chooses based on the availibility and pricing. Past year they purchased 80% from B and 20% from C. Company C aqcuired another engine company to increase its economies of scale. Later that year becasue of the possible enhanced...

Question