So, I was watching tv the other night and I saw the previews for Jimmy Kimmel that night. His celeb guests were The Jonas Brothers and Lifehouse. The preview showed Jimmy askink The Brothers a question and one of the Brothers says ‘we’re not pop, we’re rock’ and the lead singer of Lifehouse busts out laughing. It was great. Because I also think that The Jonas Brothers are pop, not rock. Bands such as Nirvana, The Rolling Stones, Pink Floyd, Foo Fighters are Rock. I just don’t know how people can put a band like The Jonas Brothers in the same category with bands like those. It’s sad. If that’s what the music industry is coming to, saying The Jonas Brothers are rock, then I may just dig my ear drums out.
The Gigantic Pocket Monster (Gipokmon) is a new toy that Mattel has introduced. Mattel currently allows toy retailers to place an order in August for delivery in November for the holiday season. It costs Mattel $1.50 to manufacture and ship each Gipokmon. Mattel charges awholesale price of $10. The Toys ‘R’ Us manager plans to sell the toy for $20. The end-customer demand for this toy is estimated to be 11000 units with a probability of 0.4, and 8000 units with a probability of 0.6.
How many units should Toys ‘R’ Us order to maximize its expected profit? What is the resulting profit for Mattel, Toys ‘R’ Us, and the supply chain, respectively?
(b) Suppose now Mattel buys back unsold Gipokmon for $4 per unit. Please answer again the questions in (a).