What is the optimal order quantity for the single entity

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Reference no: EM132148086

Suppose that Dr. Su really want to get out of academia for more $$ but driving for Uber may not be ideal for him. He decides to start a new business and now sells sunglasses to a retailer called Ultimate Vision (UV). UV purchases each one of the pairs of sunglasses from Dr. Su for $75 and retails them for $115. Dr. Su’s sourcing cost from Alibaba is $35. At the end of the season, UV estimates the salvage value is only about $25 each pair. UV believes this season’s demand can be represented by a normal distribution with a mean of 250 and a standard deviation of 125.

The following is the supply chain:

Alibaba --> Dr. Su’ store --> UV retail --> customers

(a) What is UV’s optimal order quantity?

(b) What is Dr. Su’s profit when UV order at optimal?

(d) Consider Dr. Su's store and UV retail store as a single entity, what is the optimal order quantity for the single entity?

(e) What can Dr. Su do to encourage UV order at the amount in (d)?

Reference no: EM132148086

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