Company sells two competing products

Assignment Help Accounting Basics

Reference no: EM131106658

In most of the Walton Bookstore examples in Chapter 10, we assumed that there was a single product. Suppose instead that a company sells two competing products. Sales of either product tend to take away sales from the other product. That is, the demands for the two products are negatively correlated. The company first places an order for each product. Then during a period of time, there is demand D₁ for product 1 and demand D₂ for product 2. These demands are normally distributed with means 1000 and 1200 and standard deviations 250 and 350. The correlation between D₁and D₂ is r, where r is a negative number between - 1 and 0. The unit cost of each product is $7.50, the unit price for each product is $10, and the unit refund for any unit of either product not sold is $2.50. The company must decide how many units of each product to order. Use @RISK to help the company by experimenting with different order quantities. Try this for r = - 0.3, r = -0.5, and r = - 0.7. What recommendation can you give about the "best" order quantities as the demands become more highly correlated (in a negative direction)?

Reference no: EM131106658

Questions Cloud

With products such as peanut butter and jelly : Work the previous problem when the demands are positively correlated, as they might be with products such as peanut butter and jelly. Now use r = 0.3, r = 0.5, and r = 0.7 in your simulations.

Regardless of how many are shipped : Jeep has an engine assembly plant in Detroit and a vehicle assembly plant in Chicago. Engines are transported between the two factories using trucks. Each truck trip costs $1,000 regardless of how many are shipped.

Develop a paper detailing an analysis of market structures : Develop a paper detailing an analysis of market structures and relating pricing strategies that are suitable for each of these structures. Furthermore, include a real world example of pricing strategy for a specific company by identifying its mar..

Is labeling theory a legitimate crime causation theory why : What would be another theory and strategy to avoid stereotyping individuals in the criminal justice system? Is labeling theory a legitimate crime causation theory? Why

Company sells two competing products : In most of the Walton Bookstore examples in Chapter 10, we assumed that there was a single product. Suppose instead that a company sells two competing products. Sales of either product tend to take away sales from the other product.

How many yen would you receive for every shekel exchanged : A currency trader observes that in the spot exchange market, 1 U.S. dollar can be exchanged for 3.50 Israeli shekels or for 104.00 Japanese yen. What is the cross-ex-change rate between the yen and the shekel; that is, how many yen would you receive ..

Question regarding the retirement portfolio : Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.79. He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fun..

How are the virtues acquired : In The Emperor's Club, what best describes the teacher's (Kevin Kline) response to his student's (Emile Hirsch) admission of cheating?

Construct the state-space model equivalent : Construct the state-space model equivalent of this single-input single-output recurrent network.

User Account

All Pages