A is correct but cannot find B Problem 11-10 You are a newsvendor selling San Pe

Question

A is correct but cannot find B

Problem 11-10 You are a newsvendor selling San Pedro Times every morning. Before you get to work, you go to the printer and buy the day's paper for $0.30 a copy. You sell a copy of San Pedro Times for $1.50. Daily demand is distributed normally with mean-285 and standard deviation-57·At the end of each morning, any leftover copies are worthless and they go to a recyde bin. a. How many copies of San Pedro Times should you buy each morning? answer to the nearest whole number. Use Excers NORMSINV function to find the correct critical value for the given -level Round your z value to 2 decimal places and final Optimal order quantity b. Based on a, what is the probability that you will run out of stock? (Round your answer to the nearest whole number.) Probability

Explanation / Answer

Part b:

Selling price =1.5

Purchase price = 0.3

Salvage value =0

MP = Selling price - Purchase price = 1.5-0.3 = 1.2

ML = Purchase price - salvage value = 0.3-0 = 0.3

Q =Ordering quantity is such that P>= ML / ML+MP = 0.3/0.3+1.2 = 0.3 / 1.5 = 0.2

Probability of stock out is the the probability when demand is more than Q, i.e

P ( stockout) = P( Demand=>Q) = P = 0.2

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