The critical fractile method for a newsvendor model

Reference no: EM131106546

A department store is trying to decide how many JP Desksquirt II printers to order. Because JP is about to come out with a new model in a few months, the store will order only a limited number of model IIs. The cost per printer is $200, and each printer is sold for $230. If any model IIs are still in stock when the next model comes out, they will be sold for $150 apiece. If a customer wants a model II, and there are none left, the store will special order the printer at an extra cost (to the store) of $25. These printers are not in great demand. The store estimates that the number of model IIs that will be demanded during the next few months (before the next model comes out) is equally likely to be any value from 10 to 20, inclusive. According to the critical fractile method for a newsvendor model, how many printers should the store order?

Reference no: EM131106546

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