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Consider the newsvendor problem seen in class. A product costs $20 and sells for $50. It has a salvage value of 4$ if it does not sell.
a) What is the stock-in and stock-out probability?
b) Assume the demand is uniformly distributed from 0 to 1,000, as in the exercise seen in class. What is the optimal number of products to buy?
c) Given that you bought a number of products following b), what are the net profits if you observe a demand of 500?
d) Given that you bought a number of products following b), what are the net profits if you observe a demand of 1,000? What is the stock-out cost?
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