While signing up for her benefits annual plan, a Georgia Tech employee

has the possibility of setting up a $$flexible spending$$ account for a certain

amount of dollars that she can use for covering various medical expenses

that might come up during the coming year. The advantage of such an

account is that the money assigned to this account is not taxed $($i$.$e$.,$ it is

withdrawn from the employee$$s income before the calculation of the taxes

that are due on this income$).$ On the other hand, all the money assigned to

this account must be expended by the end of the year; otherwise, it is lost.

Argue that the decision of how much money to allocate to such a flexible

spending account can be perceived as a newsvendor problem, and specify

carefully all the elements that define this problem