Lands End:-
Geoff Gullo owns a small firm that manufactures "Gullo Sunglasses." He has the opportunity to sell a particular seasonal model to Lands End. Geoff offers Lands End two purchasing options:
• Option I . Geoff offers to set his price at $65 and agrees to credit Lands End $53 for each unit Lands End returns to Geoff at the end of the season (because those units did not sell). Since styles change each year, there is essentially no value in the returned merchandise.
• Option 2. Geoff offers a price of $55 for each unit, but returns are no longer accepted. [n this case, Lands End throws out unsold units at the end of the season.
This seasons demand for this model will be normally distributed with mean of 200 and standard deviation of 1 25. Lands End will sell those sunglasses for $100 each. Geoff's production cost is $25.
a. How much would Lands End buy if they chose option I?
b. How much would Lands End buy if they chose option 2?
c. Which option will Lands End choose?
d. Suppose Lands End chooses option 1 and orders 275 units. What is Geoff Gullos expected profit?