1) Which of the following does NOT have an impact on the news vendor quantity?
The selling price of the product
The salvage value of the leftover inventory
The demand standard deviation
The mean demand volume
None of the above
2) A newsvendor orders the quantity that maximizes expected profit for two products, A and B. The critical ratio for both products is 80%. The demand forecast for both products is 9,000 units and both are normally distributed. Product A has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order more?
Product A, because it has less certain demand.
Product B, because it has more certain demand.
The order quantities are the same because they have the same critical ratio
More information is needed to determine which has the higher order quantity.
c) Consider two products A and B that have identical cost, retail price and demand parameters and the same short selling season (the summer months from May through August). The newsvendor model is used to manage inventory for both products. Product A is to be discontinued at the end of the season this year, and the leftover inventory will be salvaged at 75% of the cost. Product B will be re-offered next summer, so any leftovers this year can be carried over to the next year while incurring a holding cost on each unit left over equal to 50% of the product's cost. The quantity of each product is selected to maximize expected profit. How do those quantities compare?
The quantity of product A is higher.
The quantity of product B is higher.
The quantities are equal.
The answer cannot be determined from the data provided.