Purchase Solution

Calculating optimal order quantity

Not what you're looking for?

Ask Custom Question

A television station is considering the sale of promotional DVDs. It can have he DVDs produced by one of two suppliers. Supplier A will charge the station a set up fee of $1,200 plus $2 for each DVDs; Supplier B has no set up fee and will charge $4 per DVD. The station estimates its demand for the DVDs to be given by Q= 1,600 - 200P, where P is the price in dollars and Q is the number of DVDs. The price equation is P=8-Q/200.

a. Suppose the station plans to give away the videos. How many DVDs should it order? From which supplier?

b. Suppose instead that the station seeks to maximize its profit from sales of the DVDs. What price should it charge? How many DVDs should it order from which supplier? Solve two separate problems, one with supplier A and one with supplier B, and then compare profits.

Purchase this Solution
Solution Summary

Solution describes the steps to choose order quantity/supplier in case of free distribution and in case when it is charged.

Solution Preview

a.Suppose the station plans to give away the videos. How many DVDs should it order? From which supplier?

Q=1600-200P
Let us calculate the number of DVDs needed at nil price i.e. P=0
Q=1600-200*0=1600
He should order 1600 dVDs.

Suppose he orders from Supplier A,
Total cost=1200+2*1600=$4400

Suppose he orders from Supplier B,
Total cost=4*1600=$6400

Cost of ordering ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • EOQ

    EOQ is Economic Order quantity. It indicates the optimal order size How to determine what goes into Order Cost. How to determine what goes into Carrying Cost. What can go wrong in calculating EOQ.

  • Kanban Card-Inventory

    Size of the batch (or container quantity): The batch size is the quantity of the item to be produced in a lot (Kanban Calculation; Calculating Your JIT Bin Quantities).

  • Calculating point elasticity and optimal price

    Calculate the company's optimal shoe price if marginal cost is $10 per unit Solution: Point Elasticity = (% change in Quantity) / (% change in Price) %change in quantity demanded/%change in price=4%/-2%=-2 Calculate the company's optimal

  • Calculating optimal daily order

    208463 Calculating optimal daily order (including the use of normal distribution) I need a hand getting started with this question. A bagel shop buys each bagel for $0.08 and sells each bagel for $0.35.

  • Operations Management

    a quantity of 570 units.

  • Calculating optimal output and price levels

    price level=$70 Optimal quantity=1500 The solution determines the optimal price and quantity in the given case.

  • Inventory problems

    Identify the economic order quantity and consider the implications for making an error in calculating the economic order quantity. 6. The H.A.L. Computer Store sells a printer for $400.

  • Calculating the inventory costs and optimal reorder point

    What is the average number of units in inventory based upon ordering 250 units each time an order is placed? Order quantity=250 Average inventory=order quantity/2=250/2=125 2.

  • Calculating Production Runs

    Ordering cost, C2=$82 per order Economic order quantity = EOQ for LRM = = 392.11 units EOQ for LRM= 392.11 units To calculate the Optimal ordering cost, we need number of orders/year Number of orders/year for EOQ= = 38.25 orders/year Annual

  • Calculating equilibrium price and quantity

    217612 Market Equilibrium: Calculate the equilibrium price and quantity for a cosmetic product The producer of a cosmetic product needs to decide the optimal price to charge and the optimal quantity to supply in the market.

View More Related Solutions