Solve the newsvendor problem. Probability 0.11 0.18 0.12 0.19 0.18 0.22 Value 1 2 3 4...
Solve the newsvendor problem. Probability 0.11 0.18 0.12 0.19 0.18 0.22 Value 1 2 3 4 5 6 Purchase cost c = 20 Selling price p = 30 Salvage value v = 12 What is the optimal order quantity? Optimal order quantity
Homework Answers
Given,
Purchase cost c =20
Selling price p = 30
Salvage value v =12
p-c/p-v =
Pr[demand < 1]=0 -> Q: Is this (strictly) less than (p-c)/(p-v)=0.55..? A: Yes.
Pr[demand < 2]=0.11 -> Q: Is this (strictly) less than (p-c)/(p-v)=0.55..? A: Yes.
Pr[demand < 3]=0.29 -> Q: Is this (strictly) less than (p-c)/(p-v)=0.55..? A: Yes.
Pr[demand < 4]=0.41 -> Q: Is this (strictly) less than (p-c)/(p-v)=0.55..? A: Yes.
Pr[demand < 5]=0.60 -> Q: Is this (strictly) less than (p-c)/(p-v)=0.55..? A: No
So, Optimal order quantity is 4.
Note: I tried my best in answering the question. It'd be appreciated if you leave an upvote. Thanks in advance.
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