How many books should barnes and noble order

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Reference no: EM132256981

1. A publisher sells books to Barnes & Noble at $10 each. The unit production cost for the publisher is $2 per book. Barnes & Noble price the book to its customers at $20 and expects demand over the next two months to be normally distributed, with a mean of 15,000 and a standard deviation of 5,000. Barnes & Noble places a single order with the publisher for delivery at the beginning of the two-month period. Currently, Barnes & Noble discount any unsold books at the end of two months down to $1, and any books that did not sell at full price sell at this price.

a) How many books should Barnes & Noble order? What is its expected profit? How many books does it expect to sell at a discount?

b) What is the profit that the publisher makes given Barnes & Noble’s actions above?

Use the following information to solve parts c) and d).

A plan under discussion is for the publisher to refund Barnes & Noble $3 per book that does not sell during the two-month period. Because Barnes & Noble shares the point-of-sales data with the publisher, the publisher does not require Barnes & Noble to return all unsold books for verification purpose. As before, Barnes & Noble will discount them to $1 and sell any that remain.

c) Under this plan, how many books will Barnes & Noble order? What is the expected profit for Barnes & Noble? How many books are expected to be unsold during the two-month period? [Hint: Since Barnes & Noble gets a refund of $3 from the publisher for each unsold book as well as a $1 of clearing each unsold book after the two-month period, Co = c – b - SR. Moreover, SM = 0]

d) What is the expected profit for the publisher under the plan and given Barnes & Noble’s actions in part c)?

2. Topgun Records and several movie studios have decided to sign a revenue-sharing contract for CDs. Each CD costs the studio $1.5 to produce. The CD will be sold to Topgun for $2. Topgun in turn prices a CD at $14 and forecasts demand to be normally distributed, with a mean of 6,000 and a standard deviation of 2,000. Any unsold CDs are discounted to $1, and all sell at this price. Topgun will share 40 percent of the revenue with the studio, keeping 60 percent for itself.

a) How many CDs should Topgun order?

b) How many CDs does Topgun expect to sell at a discount?

c) What is the profit that Topgun expects to make?

d) What is the profit that the studio expects to make?

Reference no: EM132256981

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