Determine losses due to understockting and overstockting

Reference no: EM13147402

A newstand operator buys the Sunday edition of the WA post for $1.00 per copy and sells it for $1.50. The demand distribution for the Sunday edition over the last 100 weeks has been:

Number Requested Relative Frequency
less than 40 0
40 0.02
41 0.04
42 0.07
43 0.1
44 0.12
45 0.13
46 0.14
47 0.12
48 0.1
49 0.08
50 0.05
51 0.02
52 0.01
over 52 0

a. Assuming that any newspaper left over has no value and that running short has no effect on any customer's tendency to return, determine the losses due to understockting and overstockting.

b. Based on the info from a determine how many copies should be stocked. Use incremental analysis.

c. If any newspaper left over could be sold to a fish market for .10 per copy how many copies should be stocked.

Reference no: EM13147402

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