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Chapter 4: Q. 10OQ (a) (page 545)

You are a newsvendor selling the San Pedro Times every morning. Before you get to work, you go to the printer and buy the day鈥檚 paper for \(0.25 a copy. You sell a copy of the San Pedro Times for \)1.00. Daily demand is distributed normally with mean=250 and standard deviation =50. At the end of each morning, any leftover copies are worthless and they go to a recycle bin.

a. How many copies of the San Pedro Times should you buy each morning

Short Answer

Expert verified

The standard deviation is a statistic that computes the root of the variance and indicates the dispersion of a dataset compared to its mean. The quality deviation is determined as the root of the variance by computing the departure of each datum from the mean.

Step by step solution

01

Calculations of Service level

Service level =CuCu+C0=0.750.75 + 0.25= 0.75= 75%

02

Calculation of z value by using the spreadsheet =NORMSINV() function

Given,

Z = 0.67

Mean = 250

Standard deviation= 50

Calculation of total number of copies of Sam Pedro to be bought

=Mean+z蟽=250+0.67脳50=283.7 or 284

So, the total number of copies that Sam Pedro will buy is 284.

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Most popular questions from this chapter

Plan production for a four-month period: February through May. For February and March, you should produce to exact demand forecast. For April and May, you should use overtime and inventory with a stable workforce; stable means that the number of workers needed for March will be held constant through May. However, government constraints put a maximum of 5,000 hours of overtime labor per month in April and May (zero overtime in February and March). If demand exceeds supply, then backorders occur. There are 100 workers on January 31. You are given the following demand forecast: February, 80,000; March, 64,000; April, 100,000; May, 40,000. Productivity is four units per worker hour, eight hours per day, and 20 days per month. Assume zero inventory on February 1. Costs are hiring, \(50 per new worker; layoff, \)70 per worker laid off; inventory holding, \(10 per unit-month; straight-time labor, \)10 per hour; over time, \(15 per hour; backorder, \)20 per unit. Find the total cost of this plan.

Question: Solve the newsvendor problem. What is the optimal order quantity?

Probability

0.2

0.1

0.1

0.2

0.3

0.1

Value

1

2

3

4

5

6

Purchase cost c = 15

Selling price p = 25

Salvage value v =10

Consider using a simple moving average model. Experiment with models using five weeks鈥� and three weeks鈥� past data. The past data in each region are given below (week 21 is the week before week 1 in the table, 22 is two weeks before week 1, etc.). Evaluate the forecasts that would have been made over the 13 weeks using the overall (at the end of the 13 weeks) mean absolute deviation, mean absolute percent error, and tracking signal as criteria.

WEEK

-5

-4

-3

-2

-1

Atlanta

45

38

30

58

37

Boston

62

18

48

40

35

Chicago

62

22

72

44

48

Dallas

42

35

40

64

48

LA

43

40

54

46

35

Total

254

153

244

252

198

Explain the need for the time fences in the master production schedule.

Gentle Ben鈥檚 Bar and Restaurant uses 5,000-quart bottles of imported wine each year. The effervescent wine costs \(3 per bottle and is served only in whole bottles because it loses its bubbles quickly. Ben FIgures that it costs \)10 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes three weeks for an order to arrive. Weekly demand is 100 bottles (closed two weeks per year) with a standard deviation of 30 bottles. Ben would like to use an inventory system that minimizes inventory cost and will provide a 95 percent service probability.

a. What is the economic quantity for Ben to order?

b. At what inventory level should he place an order?
See all solutions

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