Should you buy another 50 seasonal jackets?
Compare sales and clearance after a change in the demand forecast.
The question
The jackets sell for one event week. Buy zero or one optional lot. The lot arrives before the event if ordered. Choose the option with higher expected contribution. There is no separate service floor or shortfall penalty in this example.
| Value | |
|---|---|
| Sellable stock today | 90 |
| Confirmed arrival before the event | 30 |
| Units in optional lot | 50 |
| Optional cost per unit ($) | 18 |
| Net proceeds per event sale ($) | 30 |
| Net clearance proceeds per unsold unit ($) | 8 |
Clearance follows the event. The starting 120 units are committed under both options.
| Units demanded | Probability (%) | |
|---|---|---|
| Low | 150 | 60 |
| High | 190 | 40 |
Sales in a scenario cannot exceed either demand or the stock you have.
“Choose whether to buy the optional lot and explain how the result could change.”
Not saved by this site. Your browser may restore text when you navigate back.
A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Set the comparison
What would you do here? Open the move you’d make.
Limit sales to available stock and use clearance for units left over.
The strong move. Compare the two choices on the same demand and use the optional cost only when you buy.
Treat all demand as event sales in both options.
Tempting, but it misses something. The order only changes sales if it puts units in stock to meet that demand.
See how a strong candidate says it
“We have 120 units before the optional buy and 170 with it. I’ll compare event sales and clearance for both quantities in each scenario.”
Why it works: Compare the two choices on the same demand and use the optional cost only when you buy.
Step 2: Value the optional lot
What would you do here? Open the move you’d make.
Buy the lot under the original demand assumptions.
The strong move. Weight the $160 and $600 outcomes by their 60% and 40% probabilities.
Claim a guaranteed $600 gain because the margin is $12 per unit.
Tempting, but it misses something. In the low scenario, 20 extra units go to clearance and earn only $8 each.
See how a strong candidate says it
“At 150 demand, the lot sells 30 extra units and clears 20, for $160 extra contribution after cost. At 190 demand, all 50 sell, for $600. The expected gain is $336.”
Why it works: Weight the $160 and $600 outcomes by their 60% and 40% probabilities.
Step 3: Use the revised demand
The retailer withdraws the planned promotion before you order. Low demand is now 110 units and high demand is 140 units. Their probabilities are still 60% and 40%.
What would you do here? Open the move you’d make.
Skip the lot under the new forecast.
The strong move. Compare both inventory choices again with the promotion removed.
Use the old positive $336 result and place the order.
Tempting, but it misses something. The old scenarios assumed the promotion. Neither revised scenario makes the optional lot profitable.
See how a strong candidate says it
“At 110 demand the lot adds no event sales and loses $500. At 140 it adds 20 sales and loses $60. The expected effect is −$324, so I would skip it.”
Why it works: Compare both inventory choices again with the promotion removed.
Step 4: State the availability trade-off
What would you do here? Open the move you’d make.
Name the possible 20-unit shortfall and what would justify another buy.
The strong move. Give the possible stockout and the conditions that could change the choice.
Tell the team 120 units cover demand in both revised scenarios.
Tempting, but it misses something. Demand could reach 140 units. The choice accepts a possible 20-unit gap to avoid the expected loss on the lot.
See how a strong candidate says it
“I would keep the 120 committed jackets. In the high case we could miss sales of 20 units. I’d reconsider if we can buy a smaller lot or confirm a replacement promotion.”
Why it works: Give the possible stockout and the conditions that could change the choice.
The answer, in short
- Decision
- Keep 120 units and skip the optional lot after the forecast change.
- Because
- At the revised demand, the lot adds an expected loss of $324.
- What would change it
- A smaller lot, stronger demand or better clearance value could change the result.
Common traps
- Treating demand as sales when stock is short.
- Giving every extra unit the regular selling margin.
Check your answer
- I compared both stock levels.
- I included clearance and optional cost.
- I used the revised demand.
- I named the possible shortfall.
Last reviewed Nov 11, 2026