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balu736 [363]
2 years ago
9

In a newsvendor model, if underage cost is three times overage cost and the seller orders the optimal quantity, then the probabi

lity that demand is less than or equal to the stocking level is:
Business
1 answer:
NeTakaya2 years ago
3 0

Answer: 75%

Explanation:

The probability that demand is less than or equal to the stocking level will be calculated thus:

Underage Cost (Cu) will be given as:

= 3 × Overage Cost(Co) = 3Co

Critical Ratio for seller is given as:

= Cu/(Co+Cu)

= 3Co/(Co + 3Co)

= 3Co / 4Co

= 75%

= 0.75

Therefore, the answer is 75%.

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