question archive Consider a firm selling a perishable product to meet market demand
Consider a firm selling a perishable product to meet market demand
Subject:Computer SciencePrice: Bought3
Consider a firm selling a perishable product to meet market demand. The demand
follows Normal distribution with mean 100 and standard deviation 20. The selling
price is $100 per unit. The firm needs to order before the selling season starts
(thus, before demand uncertainty resolved). The order cost is $30 per unit. After
satisfying the demand, the leftover inventory can be salvaged at value $10 per
unit. Address the following questions:
1. What is the firm's optimal order quantity and corresponding profit?
2. When the firm faces shortage after demand realizes, assume it can procure
from emergency supply the remaining units at $30 per unit to satisfy demand.
What is the firm's optimal order quantity and corresponding profit in this
case?
3. What is the impact of emergency supply on the firm's ordering decision and
corresponding profit? Provide explanation to justify your answer.
