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You are a newsvendor selling San Pedro Times every morning. Before you get to work, you go to the printer and buy the day’s paper for $0.25 a copy. You sell a copy of San Pedro Times for $1.25. Daily demand is distributed normally with mean = 255 and standard deviation = 51. At the end of each morning, any leftover copies are worthless and they go to a recycle bin. a. How many copies of San Pedro Times should you buy each morning? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Round your z-value to 2 decimal places and final answer to the nearest whole number.) Optimal order quantity b. Based on a, what is the probability that you will run out of stock? (Round your answer to the nearest whole number.) Probability %

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TomShelby

Answer:

A purchase of 289 newspaper will be the optimal quantity

As we manage a 75% percent we have a 25% percent change of stock-out each day

Explanation:

Answer:

Explanation:

We have to calcualte as follow:

If we understimate we leave a newspaper without sale: we loss 75 cent of gain

If we overstimate we have a leftover therefore a loss of 25 cents-

Optimal Probability = 0.75 / (0.75 + 0.25) = 0.75/1 = 0.75

We need to look into the normal distribution tables or in the suggested excel function for the Pz value at 75%

Pz = 0.67448975

Then, we solve for X

[tex]P_z = \frac{X - \mu}{\sigma}\\X = P_z \times \sigma + \mu\\X = 0.67448975 \times 51 + 255[/tex]

X = 289.3989773