A manager wants to determine how many copies of a particular
magazine that he should purchase each week.
A study of historical data shows that demand is normally distributed
with a mean = 11.73 and a standard deviation of 4.74. The manager purchases the magazines for 25
cents and can salvage unsold copies for 10 cents. The price of the magazine that he charges to
the customer is 75 cents a copy.
What
is the critical ratio?Using the normal tables, what is the
standardized z value associated with the critical ratio calculated above?How many magazines should the manager order?Suppose the manager has historical data for
the last 52 weeks showing the weekly demand for the magazine. The empirical probability associated with
each of the order quantities is give below.
Q
Frequency
F(Q)
Q
Frequency
F(Q)
0
1
.192
12
4
.5769
1
0
.192
13
1
.5962
2
0
.192
14
5
.6923
3
0
.192
15
5
.7885
4
3
.0769
16
1
.8077
5
1
.0962
17
3
.8654
6
2
.1346
18
3
.9231
7
2
.1731
19
3
.9808
8
4
.2500
20
0
.9808
9
6
.36654
21
0
.9808
10
2
.4038
22
1
1.0000
11
5
.5000
Calculate the new order quantity for the
empirical data given.
