What is the implied cost of shortage

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Reference no: EM13224812

A popular newsstand in a large metropolitan area is attempting to determine how many copies of the Sunday paper it should purchase each week. Demand for the newspaper on Sundays can be approximated by a Normal distribution with ? = 450 and ? = 100. The newspaper costs the newsstand 50 cents/copy and sells for $2/copy. Any copies that go unsold can be taken to a recycling center, which will pay 5 cents/copy. a) How many copies of the Sunday paper should be ordered? (524) b) The newsstand actually orders 550 copies every week. Since there is no question on the cost of excess as outlined above, what is the implied cost of shortage, given the actual order size? What might be a reason for this difference in shortage costs? ($2.39)

Reference no: EM13224812

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