Inventory Control (Newsvendor) Model Calculator
This calculator is designed for business operations professionals to help optimize inventory control decisions using the Newsvendor model. It calculates the optimal order quantity to minimize costs associated with understocking and overstocking.
Newsvendor Model Calculator
Results
Data Source and Methodology
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The Formula Explained
\(Q^* = F^{-1} \left(\frac{p - c}{p - v}\right)\)
Glossary of Terms
- Expected Demand: The forecasted number of units demanded.
- Cost per Unit: The cost to produce or purchase one unit.
- Selling Price per Unit: The price at which one unit is sold.
- Salvage Value per Unit: The remaining value of unsold units.
How It Works: A Step-by-Step Example
Suppose you expect to sell 1000 units, with a cost of $5.00 per unit, a selling price of $10.00 per unit, and a salvage value of $2.00 per unit. The optimal order quantity is calculated using the Newsvendor model formula.
Frequently Asked Questions (FAQ)
What is the Newsvendor Model?
The Newsvendor Model is used to determine optimal order quantities for products with uncertain demand and a short selling period.
How do I calculate the optimal order quantity?
The optimal order quantity is calculated using the critical ratio and inverse demand distribution.
What factors affect the decision?
Factors include cost per unit, selling price, salvage value, and demand forecast.
Why is the salvage value important?
The salvage value offsets losses from unsold inventory.
Is this model applicable to all products?
This model is most applicable to products with single-period or perishable demand.
Formula (LaTeX) + variables + units
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\(Q^* = F^{-1} \left(\frac{p - c}{p - v}\right)\)
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Last code update: 2026-01-19
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