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Consider two products A&B that have identical cost, retail price and demand parameters and the same short selling season ( the summer months from May through August). The newsvendor model is used to manage inventory for both products. Product A is to be discontinued at the end of the season this year, and the leftovers will be salvaged at 75% of the cost. Product B will be reoffered next summer, so any leftovers this year can be carried over to the next year while incurring a holding cost on each unit left over equal to 20% of the product's costs. How do the stocking quantities for these products compare?

a. stocking quantity of product A is higher

b. stocking quantity of product B is higher

c. stocking quantities are equal

d. the answer cannot be determined from the data provided

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92037559

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