Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 100. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5.What is its expected profit if Store A’s order quantity is 400 units? Please provide clear answers, not misleading
We need to find the optimal order quantity:
The maximum profit is achieved if the store sells 400 units:
Maximum Profit=(Price−Cost)∗ Sell Units - Overage Cost * (Optimal Quantity - Sell) = ($30−$10)∗400 - (184 * 5) = $ 7,080
Store A uses the newsvendor model to manage its inventory. Demand for its product is normally...
24. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 100. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5.What is its expected profit if Store A's order quantity is 400 units?
only a and b
pt 2 for reference
newsvendor model
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