Suppose the newsvendor model describes a firms operations decision. Is it possible to have positive stockout probability
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Suppose the newsvendor model describes a firm’s operations decision. Is it possible to have positive stockout probability and positive expected leftover inventory? Choose the best answer.
a. No. If there is leftover inventory, then a stockout doesn’t occur.
b. No. If the stockout probability is positive, then expected inventory must be negative.
c. No. Actual demand can differ from sales.
d. Yes. A firm does not stock out and have leftover inventory at the same time, but the stockout probability can be positive even though there is positive expected leftover inventory.
e. Yes, as long as the underage cost is greater than the overage cost
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Related Book For
Operations Management
ISBN: 9781260547610
2nd International Edition
Authors: Gerard Cachon, Christian Terwiesch
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