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Calculating the number of calenders that should be ordered

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The J&B Card Shop sells calendars depicting a different Colonial scene each month. The once-a-year order for each year's calendar arrives in September. From past experience, the September to July demand for the calendars can be approximated by a normal probability distribution with r=500 and o=120. The calendars cost $1.50 each, and J&B sells them for $3 each.

a. If J&B throws out all unsold calendars at the end of July (i.e., salvage value is zero), how many calendars should be ordered?
b. If J&B reduces the calendar price to $1 at the end of July and can sell all surplus calendars at this price, how many calendars should be ordered?

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Solution determines the number of calenders that should be ordered in the given cases.

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a. If J&B throws out all unsold calendars at the end of July (i.e., salvage value is zero), how many calendars should be ordered?

Cost, c=$1.50
Selling price,p=$3.00
Salvage value, s=$0
Cost of overage=Co=c-s=1.50-0=$1.50
Cost of ...

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
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