John is trying to decide on how many copies of a book to order at the start of the upcoming selling season for a booksto
Posted: Fri May 20, 2022 8:28 am
John is trying to decide on how many copies of a book to order
at the start of the upcoming selling season for a bookstore. The
book retails at $28.00, and the unsold copies will be disposed at
75% off the retail price at the end of the season.
John estimates that demand for this book during the season is
normal with a mean of 100 and a standard deviation of 42.
(a) Suppose the unit production-plus-shipping cost of the book
is $8.00. If the bookstore is owned by the publisher (i.e., the
bookstore and the publisher are centralized) and John is the
manager of the bookstore, then how many books should John order to
maximize the expected profit of the publisher? [10 pts]
(b) If the bookstore is owned by John and
he purchases the book from the publisher at $20.00, then how many
books should John order to maximize his own expected profit?
[10 pts]
Suppose John owns the bookstore. The publisher
is thinking of offering the following deal to John. At the end of
the season, the publisher will buy back unsold copies at a
predetermined price of $15.00. John would have to bear, however,
the cost of shipping unsold copies back to the publisher at $1.00
per copy.
(c) How many books should John order to maximize his expected
profits given the buyback offer? [10 pts]
(d) Suppose the publisher continues to charge $20 per book and
John still incurs a $1 cost to ship each book back to the
publisher. What price should the publisher pay John for returned
books to maximize the supply chain’s profit? [10 pts]
at the start of the upcoming selling season for a bookstore. The
book retails at $28.00, and the unsold copies will be disposed at
75% off the retail price at the end of the season.
John estimates that demand for this book during the season is
normal with a mean of 100 and a standard deviation of 42.
(a) Suppose the unit production-plus-shipping cost of the book
is $8.00. If the bookstore is owned by the publisher (i.e., the
bookstore and the publisher are centralized) and John is the
manager of the bookstore, then how many books should John order to
maximize the expected profit of the publisher? [10 pts]
(b) If the bookstore is owned by John and
he purchases the book from the publisher at $20.00, then how many
books should John order to maximize his own expected profit?
[10 pts]
Suppose John owns the bookstore. The publisher
is thinking of offering the following deal to John. At the end of
the season, the publisher will buy back unsold copies at a
predetermined price of $15.00. John would have to bear, however,
the cost of shipping unsold copies back to the publisher at $1.00
per copy.
(c) How many books should John order to maximize his expected
profits given the buyback offer? [10 pts]
(d) Suppose the publisher continues to charge $20 per book and
John still incurs a $1 cost to ship each book back to the
publisher. What price should the publisher pay John for returned
books to maximize the supply chain’s profit? [10 pts]