Determine the optimal order size, Microeconomics

Assignment Help:

A major component of the costs of many large firms is the cost associated with ordering and holding inventory. If the yearly demand for the good is D and the size of each order placed is  q  then the number of orders  N  in each year is:

N=D/Q

If the cost of placing each order is Co then the cost of placing all N orders is:

OC = CoN

The second component is the carrying or handling cost of an inventory. Under the assumption that the average number of items in stock is q / 2  and with cost of each item set at  p , the value of this average number of items is p (q / 2) . The carrying in this situation is the proportion C of this value:

CC = Cnp (q/2)

The third component of total costs is simply the purchase cost of all the items, or PC = pD.  Assuming that Co, D, Cn and p are constant, what is the optimal order size q?


Related Discussions:- Determine the optimal order size

Define migration in microeconomics, Q. Define Migration in Microeconomics? ...

Q. Define Migration in Microeconomics? Migration:It's the movement of human beings from one country or region to another. Sometimes migration is motivated by economic factors (

Amalgamation, explain the following disadvantages of amalgamation. Complex ...

explain the following disadvantages of amalgamation. Complex nature

Demography, This involves the characteristics of the production human as we...

This involves the characteristics of the production human as well as non human using the product concerned. For example it may pertain to the number and characteristics of children

Determine the consumer surplus and the average price per cup, Suppose the d...

Suppose the demand curve for a consumer for coffee is: Q = 6 – 2P, where Q represents the number of cups per day and P is the price of coffee per cup.  Question: Sppose the co

Equilibrium point of a monopoly, Using a diagram explain the equilibrium po...

Using a diagram explain the equilibrium point of a monopoly

Long Run Graph Question, If there is an industry and some of the companies ...

If there is an industry and some of the companies get shut down, how would you graph the short run and long run effects

Types of inflation in a country, (a) Describe the different types of inflat...

(a) Describe the different types of inflation in a country. (b) Describe the trade-off between inflation and unemployment, using appropriate diagrams. (c) Mauritius has bee

Insurance - reducing risk, Insurance - Risk averse are willing to pay t...

Insurance - Risk averse are willing to pay to keep away from risk. - If cost of insurance equals expected loss, risk averse people will buy sufficient insurance to totally r

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd