Assignment task: Choose the best answer.
O'Neill is looking at a product which fits the criteria for using the Newsvendor model, and O'Neill is looking to maximize profits. Let's assume the overage cost, mean, and standard deviation for a given product remain the same. As the underage cost for this product increases....
- the optimal quantity to buy increases.
- the optimal quantity to buy decreases.
- the optimal quantity to buy remains the same.
- the answer depends on whether the critical ratio is above or below 0.5