Question #1 [Basic Newsboy] A publisher sells books to Borders at $12 each. Bord

Question

Question #1 [Basic Newsboy] A publisher sells books to Borders at $12 each. Borders prices the book to its customers at $24 and expects demand over the next two months to be normally distributed, with a mean of 20,000 and a standard deviation of 5,000. Borders places a single order with the publisher for delivery at the beginning of the two-month period. Currently, Borders discounts any unsold books at the end of two months down to $3, and any books that did not sell at full price sell at this price. a. Borders will consider this book to be a bestseller if it sells 25,000 copies. What is the probability that it is a bestseller? b. What order quantity maximizes Borders

Explanation / Answer

Buyback Contracts Inputs Mean Demand, Mu 20000 Standard Deviation of demand 5000 Barnes & Noble's Cost, c = $            12 Barnes & Noble's Sale price, p = $            24 Barnes & Noble's Salvage value, s=b = $              3 Publishers Cost, v $              1 Publishers Sale price, c $            12 Publishers buyback price, b $             -   Intermediate Calculations Cost of Understocking, Cu $            12 Cost of Overstocking, Co $              9 Outputs Order size, O* 20900 overstock 2477 understock 1577 Barnes & Noble's Expected Profit $ 198,784 Publisher's E(Profit) $ 229,901 Total Supply Chain Profit = $ 428,685

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---