Solve the newsvendor problem. What is the optimal order quantity? MCh-11-Prob-HW

Question

Solve the newsvendor problem. What is the optimal order quantity?

MCh-11-Prob-HW-Invento ×QOps Class flashcards ! Qu c Dezto.mheducation.com/hm.tpx ,eCharlie's Pizza Orders All × Ch 11 Prob_HW Inventory Management instructions I help Save & Exit Submit Question 3 (of 6) Time remaining: 3:47:46 value: 10.00 points Problem 11-3 Solve the newsvendor problem. What is the optimal order quantity? Probability Value 0.10 0.17 0.11 0.27 0.25 0.10 4 5 Purchase cost c14 Selling price p Salvage value v = 8 20 Optimal order quantity Hints References eBook & Resources Hint #1 Hint #2 O Ask me anything O DIe 8:11 PM 6/19/2016

Explanation / Answer

Selling price (s) = $ 20 ; C = $ 14 ; V = $ 8

C1 = C - V

C1 = $ 14 - $ 8

C1 = $ 6

C2 = S - C

C2 = $20 - $14

C2 = $ 6

C2 / C1 + C2 = 6 / 6 + 6

C2 / C1 + C2 = 0.5

0.5 lies between the value 3 & 4 ;

The optimal order quantity is 4 .

Value Probability cumulative probability 1 0.1 0.1 2 0.17 0.27 3 0.11 0.38 4 0.27 0.65 5 0.25 0.9 6 0.1 1

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