Question

Berry Bloom Co is getting ready for Mother's Day and needs to purchase bouquets of flowers which will be sold prior to the holiday. Due to the high demand leading up to Mother's Day, the bouquets of flowers are sold at $20/bouquet. However, after the holiday, the bouquets can only be sold at $10/bouquet. The bouquets of flowers are purchased at $15/bouquet. Berry Bloom Co wants to perform an analysis to determine how many bouquets should be procured in preparation for Mother's Day. This type of problem is called the Group of answer choices Economic Order Quantity Problem Nonlinear Optimization Problem Newsvendor Problem Discriminant Analysis Problem

Answer 1

Berry Bloom Co.

This type of problem that requires Berry to perform an analysis to determine how many bouquets of flowers to procure in preparation for Mother's Day is a:

Newsvendor Problem.

Step-by-step explanation:

a) Data and Calculations:

Selling price of bouquets of flowers = $20/bouquet

Cost price of bouquets of flowers = $15/bouquet

Profit per bouquet during Mother's Day = $5 ($20 - $15)

After-holiday selling price of the bouquets of flowers = $10/bouquet

Loss per bouquet of flower after the holiday = $5 ($15 - $10)

b) The Newsvendor model describes the challenges facing Berry Bloom as it gets ready for the Mother's Day holiday. The company must decide the volume of bouquets of flowers to procure prior to the holiday. The purchase decision becomes a problem because the demand for flowers is not certain, and the company is aware that unsold bouquets will be sold at a loss of $5 per bouquet after the holiday.