The Sari-Sari Store Restock Decision
A sari-sari store owner has ₱12,000 in cash and one week before the next delivery. Three products are candidates for restocking. Product A costs ₱40 per unit and sells for ₱55; last week she sold 90 units but had to turn away customers after running out on day 4. Product B costs ₱25 and sells for ₱30; she sold 200 units with no stockouts. Product C costs ₱80 and sells for ₱110; she sold 40 units and had 15 units left over at week's end. Shelf space allows at most 350 units total across all products. She believes Product A's stockout means demand was 'at least double' what she sold. She wants the restock plan that maximizes profit for the coming week while keeping at least ₱2,000 cash unspent as a buffer.
1. Compute the per-unit profit margin and profit-per-peso-invested for each product, then rank them for a cash-constrained restock.
Read the worked answer
- A: margin ₱55 − ₱40 = ₱15; per peso invested = 15/40 = ₱0.375.
- B: margin ₱30 − ₱25 = ₱5; per peso = 5/25 = ₱0.20.
- C: margin ₱110 − ₱80 = ₱30; per peso = 30/80 = ₱0.375.
A and C tie on cash efficiency (₱0.375 per peso); B is worst. But C left 15 unsold units, so its realized margin is weaker: 15 × ₱30 = ₱450 of margin tied up in dead stock. Ranking by efficiency alone would mislead - C's leftover inventory must be subtracted before comparing.
2. Using the ₱12,000 cash, the ₱2,000 buffer, and the 350-unit shelf limit, propose a concrete order quantity for each product and justify it.
Read the worked answer
Spendable cash = ₱12,000 − ₱2,000 = ₱10,000.
Constraint check on shelf: 350 units max. A plausible balanced plan:
- A: 120 units × ₱40 = ₱4,800 (raise from 90 because of the stockout; do not assume 'double' without evidence)
- B: 160 units × ₱25 = ₱4,000
- C: 15 units × ₱80 = ₱1,200 (only enough to replace the proven leftover demand gap)
Total cost = ₱4,800 + ₱4,000 + ₱1,200 = ₱10,000 (exactly the spendable amount, buffer intact). Total units = 120 + 160 + 15 = 295, under the 350 shelf cap.
Justification: A gets the biggest share because it has both a strong margin and demonstrated unmet demand. C is cut sharply because 15 units already went unsold - restocking at the old level would repeat the loss. B is steady, low-margin filler that uses remaining shelf space cheaply.
3. The owner claims Product A's true demand was 'at least double' the 90 units sold. Explain why this inference is unsound and what data would settle it.
Read the worked answer
The 90 units sold is a censored figure: sales stopped at 90 only because stock ran out on day 4. The true demand could be 95 or 300 - the stockout tells us demand was at least 90, not how much more. 'Double' is an assumption, not an observation.
What would settle it: (a) a count of turned-away customers or unmet requests during days 4-7, (b) a small trial restock (e.g., 120 units) and measuring whether it also sells out, or (c) sales rate on days 1-3 extrapolated to a full week. Any of these replaces the guess with a measured number. Ordering on the 'double' assumption risks overstock and ties up cash that the buffer rule was meant to protect.