Reference no: EM1390298

The Express was established as the town newspaper after the first year of operations. The daily demand remained at 500, the standard deviation of daily demand at 10.0 Armentrout retailed at $1 newspapers purchased from Sheen at $080 per copy Armentrout is responsible for unsold newspapers. Having virtually no competition from other newsstands and being firmly established in his store at the intersection of Center and Main Streets, Armentrout broadened his product line, offering coffee, soft drinks, and breakfast items such as muffins and bagels He had become t friendly with a number of customers who often shopped to discuss the latest new's in the express. Inspired by the success of the Express and his newsstand, Armentrout decided to launch his own private-label newspaper A short, two-page newspaper. Ralph's Private Eye, news from around town with little analysis and no special section Consistent with its low-cost image, the Private was photocopied at the Kinkos store adjacent to Armentrout's newsstand. Hence, he carried no inventory, instead making copies as customers demanded them. The marginal Cost iv produce the Private which retailed .50 (well below the $1 that was charged by the Express) was $0.10 (i.e. the cost of photcopying two pages at Kinko's). Sheen believed that the Private posed no threat to the Express. "It's a rag!' sheen exclaimed; 1 cannot imagine any consumer choosing the Private instead of the Express." Armentrout agreed that his newspaper was a rag" and that no customer would choose the Private over the more expensive Express. but he observed that he regularly stocked out of the latter. He estimated that approximately 4O% of the customers who experienced a stock out of the Express, would switch to the Private. The Other 60% would not buy a newspaper at his stand on that particular day. Suppose that h is fixed at 2.25 hours so that the demand is normal with mean of 575 and standard deviation of 100. Determine: a) Optimal stocking quantity (Q1*, rounded to the nearest integer) of the Express and the expected order fill rate given Q1* b) If daily real estate costs for each additional newspaper were at approximately 3 cents (the scenario of 4.c), determine the corresponding new optimal stocking quantity (Q2*, rounded to the nearest integer) of the Express.