Claimed that the critical fractile formula

Reference no: EM131106429

We claimed that the critical fractile formula, Equation (12.8), is appropriate because the optimal Q should satisfy c_under(1 - F(Q)) = c_over F(Q), that is, the cost of under stocking times the probability of under stocking should equal the cost of overstocking times the probability of overstocking. Assume that Q satisfies this equation [which is equivalent to Equation (12.8)]. Use a probability argument to show why Q - 1 and Q + 1 are both worse than Q in terms of expected cost.

Reference no: EM131106429

Questions Cloud

Context related to financial accounting : Or wealthy outside investors may acquire enough shares to gain this same level of power. Such owners have genuine authority within the corporation. How is this context related to financial accounting?

Dividends are sometimes said to have been paid : Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

What amount of unamortized premium on bond : What amount of unamortized premium on bond should Webb report in its June 30, 2011 balance sheet?

How large a sales increase can the company achieve : Pierce's profit margin is 5%, and its retention ratio is 40%. How large a sales increase can the company achieve without having to raise funds externally?

Claimed that the critical fractile formula : We claimed that the critical fractile formula, Equation (12.8), is appropriate because the optimal Q should satisfy cunder(1 - F(Q)) = cover F(Q), that is, the cost of under stocking times the probability of under stocking should equal the cost of ..

How many shares of beck''s common stock were outstanding : Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, 2011, how many shares of Beck's common stock were outstanding?

What are the principal considerations of a board of director : What are the principal considerations of a board of directors in making decisions involving dividend declarations? Discuss briefly.

Shortage cost and the one with a service level constraint : In both (R,Q) models, the one with a shortage cost and the one with a service level constraint, we set up Solver so that the multiple k is constrained to be nonnegative.

What was ambrose''s total debt : Ambrose plans to sell new common stock in the amount of $75,000. The firm's profit margin on sales is 6%; 60% of earnings will be retained. a. What was Ambrose's total debt in 2008? b. How much new long-term debt financing will be needed in 2009?

User Account

All Pages