Operations Research05 marksNumerical: marginal analysis newsboy problemMarginal analysis approach
Optimal Number of Magazines Using Marginal Analysis A newspaper boy estimates the probability of the demand for a new magazine is as follows: A copy of the magazine cost of Rs. 8 can be sold for Rs. 10. Based on this information, find optimal number of the newspaper that would maximize the profit by
Optimal Number of Magazines Using Marginal Analysis
A newspaper boy estimates the probability of the demand for a new magazine is as follows: A copy of the magazine cost of Rs. 8 can be sold for Rs. 10. Based on this information, find optimal number of the newspaper that would maximize the profit by using marginal analysis approach.
| Demand | 11 | 12 | 13 | 14 | 15 |
|---|---|---|---|---|---|
| Probability | 0.10 | 0.15 | 0.30 | 0.25 | 0.20 |
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- Cost per magazine (C) = Rs. 8 - Selling price per magazine (S) = Rs. 10 - Marginal Profit (MP) = Selling price - Cost = $10 - 8 = $ Rs. 2 (profit per unit if sold) - Marginal Loss (ML) = Cost per unit unsold = Rs. 8 (loss per unit if not sold) Demand distribution: Demand 11 12 13 14 15 --------...