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Hello, I was needing to know how to do this problem step by step with answers either by hand or in excel using newsvendor model.
Hello, I was needing to know how to do this problem step by step with answers either by hand or in excel using newsvendor model. This is a practice example so I need to know this for the real problem given.
After trying out boba milk tea for the first time, Minnie decided that she wanted to open up a milk
tea store called Boba Hour. The estimated cost to lease a storefront in Tempe, AZ is
approximately $120 per day. Minnie focused on freshness as a method to differentiate herself
from existing local milk tea stores. The ingredients for milk tea are prepared each morning and
estimated to cost around $2.00 a drink. The drinks were then sold to customers for $3.75.
Because of the freshness strategy, ingredients that are left over at the end of the day are
tossed. Demand for milk tea is normally distributed with a mean of 150 and a standard deviation
of 25.
1. How many cups worth of ingredients should Minnie make? What is the profit for this
optimal quantity?
2. Verify that the optimal quantity is consistent with optimal quantity in Newsvendor model.
3. Minnie believed that investing in some marketing ads would increase demand, with each
additional ad increasing mean demand by 15 √
