Uses the newsvendor model to manage its inventory

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1. Restaurant A uses 60 bags of tomatoes each month. The tomatoes are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Restaurant A’s annual inventory holding cost percentage is 40%. If Restaurant A chooses to use the economic order quantity when placing an order for tomatoes, what are its ordering and holding costs per year expressed as a percentage of the annual purchasing cost?

2. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 250. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A’s order quantity is 400 units?

Reference no: EM131780592

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