Question

Solve the newsvendor problem.

Probability	0.11	0.11	0.19	0.22	0.11	0.26
Value	1	2	3	4	5	6

Purchase cost c	=	25
Selling price p	=	35
Salvage value v	=	17

Answer 1

Probability	Value	Random Digit
0.11	1	1-11
0.11	2	12-22
0.19	3	23-41
0.22	4	42-63
0.11	5	64-74
0.26	6	75-100

As you havent asked any question regarding this,you haven't provided what the maximum demand of newspaper per day is and haven't given any random digits based on this.

I'll go explain how to solve this problem.

If you're given some random digts, x1,x2,x3.

You gotta check what range they're in, and what their value is.

For example, random digits are given as 25,67,34.

25 is in range of 23-41 and thus has value of 3.

67 has value of 5

34 has value of 3.

So, if maximum demand per day is 4.

You will sell only 4 newspaper per day and the remaining will be sold as salvage.

If you bought less than 4 newspapers, you gonna lose the profit .

For example.

If value we obtained through random digits is 5 and demand is given as 4.

we will sell 4 newspapers and sell one as salvage.

Total profit would be, = Selling price*No.of newspapers sold - Purchase cost*No.of newspapers totally bought+Salvage value* No.of newspapers left out

so profit here will be = 35*4 - 5*25 + 17*1 = 32

Note: I tried my best in answering the question. It'd be appreciated if you leave an upvote.Thanks in advance.