Reference no: EM132198986
Question: Wholesale contract and buy back contract
Consider a supply chain consisting of a single manufacture and a single retailer. The manufacturer supplies fashion item whose demand will disappear at the end of six months from today ( today is the first day of the first month). The demand and associated cost are given as follow:
Wholesale per unit : $100
Selling price per unit : $175
Salvage value per unit : $20
Fixed production cost : $150,000
Variable cost : $ 40
Profit = Revenue - Variable Cost - Fixed Cost + Salvage
Assume Manufacture min.order quantity is 15,000 units
a. how much unit is optimal demand?
b. calculate retailer profit; manufacturer profit and suply chain profit at optimal demand?
c. If retailer can increase order to be 18000, manufacturer offer to retailer, buy back price is $ 45, assume 5% fashion not sold, calculate supply chain profit?