Response to the following problem:
Clothesline, Inc. is a retailer of moderately priced women's clothing. Clothesline's policy is to give customers a $5 gift certificate if they request an out- of stock advertised item. This certificate is estimated to cost the company only $3, but it avoids a loss in customer goodwill.
Clothesline is considering selling a line of scarves produced by a noted fashion designer. Because of long lead times, Clothesline can only place one order for the scarves. The scarves cost Clothesline $6.25, and it plans to retail them for $10.95. Clothesline estimates that total demand at its 5 5 stores during the selling season will follow approximately a normal distribution, with a mean of 8000 units and a standard deviation of 1500 units. Any scarves left in inventory at the end of the selling season will be marked down to a clearance price of $4.95 and sold quickly. On the basis of this information, determine how many scarves Clothesline should order. Comment on any assumptions you made to solve this problem.