Question: 5 . Consider two products A and B that have identical cost, retail price and demand parameters and the same short selling season ( the
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 leftovers will be salvaged at of the cost. Product B will be reoffered 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 of the product's cost. Before the selling season, you need to set the optimal ordering quantity for each product. Which one of the following is correct?
a Ordering quantity of product A is higher.
b Ordering quantity of product B is higher.
c Ordering quantities are equal.
d The answer cannot be determined from the data provided.
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