The Shoprite grocery store places orders each week for an entertainment magazine that it stocks on the shelves next to the cashiers. The newsstand price for the magazine is $ 5 and the cost per magazine from the publisher is $ 3. Shoprite can return any unsold magazines at the end of the week for a 50¢ credit. Answer the following questions using weekly order sizes and demand levels of 200, 400, and 600 magazines.
Based on historical data, Shoprite has estimated that the probabilities of a weekly demand of 200, 400, and 600 magazines are 0.22, 0.34, and 0.44 respectively.
a. Choose the best order quantity of magazines using this probability data.
b. What is the most that Shoprite should pay for additional information about the weekly demand for magazines?

  • CreatedJuly 29, 2015
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