#5 5. value: 1.00 points Conceptual Question 13-2 A newsvendor orders the... A n

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#5

5. value: 1.00 points Conceptual Question 13-2 A newsvendor orders the... A newsvendor orders the quantity that maximizes expected profit for two products, A and B. The critical ratio for both products is 0.8. The demand forecast for both products is 9,000 units and both are normally distributed Product A has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order more? °Product A, because it has less certain demand. OProduct B, because it has more certain demand. OThe order quantities are the same because they have the same critical ratio. °More information is needed to determine which has the higher order quantity

Explanation / Answer

Critical Ratio is calculated as Cost of understocking/(Sum of(Cost of Understocking+Cost of Overstocking))

Since Critical Ratio is same for both the products, to cover up the demand of each product, same quantity needs to be ordered.

Ans - Option C

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