Consider a supply chain with a manufacturer (M) and a retailer (R). The manufacturer produces a product A at a cost of c = $50. The manufacturer offers the product to the retailer at a wholesale price of w = $70, and fixes the sale price to p = $90. The market demand is normally distributed with mean of 10,000 units and standard deviation of 1000. Answer the following questions: a. What is the optimal order quantity for the retailer? b. What is the optimal order quantity if the wholesale price is changed to $60? Does the optimal order quantity increase or decrease compared to 1a? Why? c. What is the optimal order quantity if the wholesale price is changed to $80? Does the optimal order quantity increase and decrease compared to 1a? Why?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
icon
Related questions
icon
Concept explainers
Topic Video
Question

Consider a supply chain with a manufacturer (M) and a retailer (R). The manufacturer produces a product A at a cost of c = $50. The manufacturer offers the product to the retailer at a wholesale price of w = $70, and fixes the sale price to p = $90. The market demand is normally distributed with mean of 10,000 units and standard deviation of 1000. Answer the following questions:

a. What is the optimal order quantity for the retailer?
b. What is the optimal order quantity if the wholesale price is changed to $60? Does the optimal order quantity increase or decrease compared to 1a? Why?
c. What is the optimal order quantity if the wholesale price is changed to $80? Does the optimal order quantity increase and decrease compared to 1a? Why?
d. If the actual market demand is equal to the mean demand, then what are the profits of the manufacturer and the retailer?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps with 9 images

Blurred answer
Knowledge Booster
Inventory management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.