[Newsvendor] Jack Schoppe is evaluating two locations for starting a QuizYes toa

Question

[Newsvendor] Jack Schoppe is evaluating two locations for starting a QuizYes toasted sub outlet. The demand in location A is normally distributed with a mean of 150 subs a day with a standard deviation of 50. Location B's daily demand averages at 160 with a standard deviation of 75. In both locations Jack will be able to sell his subs for $6.00 each. The meat/veggies for the subs cost about $3.00 per sub. Since they can be refrigerated, meat and veggies can be stored without wastage if there are leftovers at the end of a business day. If opens one of the outlets, Jack must order fresh breads (for subs) every day from a centralize QuizY'es Bakery and dispose of the remaining breads at the end of the day. The Bakery harges $1.00 per bread a. [2] How many units of bread should Jack buy per day from the Bakery if he opers outlet in location A? b. [2] How many units of bread would he need to order in location B?

Explanation / Answer

here at locatin A

mean demand = 150 subs a day

stnadard deviation of demand = 50 subs a day

Here selling price = $ 6.00

costs = $ 3.000 per day + $1.00 per bread = $ 4.00 per day

salvage cost = 0

so here as per newspaper vendor model

Optimum Output if Q0

F(Qo) = (4 - 0)/ (6 - 0) = 0.6667

so here now we have to find Z value related to 66.66667 percentile

Z = 0.4307

0.4307 = (Q0 - 150)/50

Q0 = 150 + 0.4307 * 50 = 171.54

he must 172 breads if he opens his outlet in location A.

(B) Now for location B also

Z = 0.4307

0.4307 = (Q0 - 160)/75

Q0 = 160 + 0.4307 * 75= 192.3025

he must 192 breads if he opens his outlet in location B.

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