Fisher-Price toy Company (FP), designed a new doll which fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, due to supply chain disruption is very uncertain. The uniform distribution with lower bound of $30 and an upper bound of $40 is assumed to be a good description of variable cost. During the holiday selling season, FP will sell the dolls for $45 each. If FP overproduces the dolls, the excess dolls will be for sale for $12 per doll. Demand for new toys during the holiday selling season is uncertain. The normal probability distribution with an average of 62,000 dolls and a standard deviation of 14,000 is assumed to be a good description of the demand. FP has tentatively decided to produce 62,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision.
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